Sustainable Businesses in Developing Economies: Socio-Economic and Governance Perspectives 9783030516802

Citation preview

Rajagopal

Sustainable Businesses in Developing Economies Socio-Economic and Governance Perspectives

Sustainable Businesses in Developing Economies

Rajagopal

Sustainable Businesses in Developing Economies Socio-Economic and Governance Perspectives

Rajagopal EGADE Business School Mexico City, Mexico

ISBN 978-3-030-51680-2 ISBN 978-3-030-51681-9 (eBook) https://doi.org/10.1007/978-3-030-51681-9 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG, part of Springer Nature 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

…to Arati, my wife who is central to my every endeavor

Preface

Contemporary marketing has evolved alongside the sustainability perspectives as a dynamic science and spanned across temporal and spatial dimensions involving society, public administration, and market players. In the process, global sustainable commitment and consumers’ welfare formed the foundations of markets. The production and consumption patterns are associated with a wide range of sustainability issues throughout the lifecycle of product and services. The conventional industry practices in developing economies result into various social and ecological problems. Industries that pioneer sustainability consciousness in the society integrate strategies to manage the ecosystem through their business models. The integrated business models with sustainability commitment can be explained in terms of their value proposition, and value creation and delivery though effective corporate social responsibility. These perspectives need to be discussed in terms of cleaner production and consumption, and managing constituents of sustainable ecosystems through global-local business models. Though the literature proposes several conceptual solutions, there is a need to rethink on modular designs and product-service systems within global-local business dynamics.1

1 Bridgens, B., Hobson, K., Lilley, D., Lee, J., Scott, J. L., and Wilson, G. T. (2017). Closing the loop on e-waste: A multidisciplinary perspective. Journal of Industrial Ecology, 39 (1), 1–13.

vii

viii

PREFACE

Another significant development in the recent past is about the application of circular economy, which supports the global sustainability move and induces shifts in consumption patterns. The circular economy (CE) is modeled as an industry, which encourages recycling of wastes for producing industrial products, and adheres to the global sustainability commitments. However, conventional industrial system tends to collapse as the consumption level increases due to the scarcity of ecosystembased resources. The circular economy has been implemented in industries such as steel, paper, polymers, and products such as mobile phones. In the various industrial sectors, the CE has shown positive impact on the resources management.2 Therefore, holistic assessment of systemic influences of the circular economy is necessary from a global sustainability point of view and guide companies to develop sustainable business modeling. CE comprises of end-of-life (decline stage) management of a product, so that the product after its completion of functional life could regain commercial value and could be brought back into the supply chain process by various means rather than considered as a waste.3 Sustainability concerns, pro-environment knowledge, and the social dynamics of markets drive the consumption behavior of green products among consumers. As the management of green products are based on intangible factors, trust plays a central role in building cognitive ergonomics among the consumers. In addition, consumer knowledge and social consciousness build the foundation of green consumer behavior. Some previous studies reveal that the global sustainability drive has influenced consumers to change their behavior and purchase decisions through the consumption of eco-friendly alternatives.4 The green consumption behavior has emerged over time in food consumption and transport sustainability, and toward renewable energy usage. Public policies and social consciousness also contributed significantly in transforming the consumption behavior at macro level. Therefore, many consumers are 2 Hanumante, N. C., Shastri, Y., and Hoadley, A. (2019). Assessment of circular

economy for global sustainability using an integrated model. Resources, Conservation and Recycling, 151, Art. 104460. 3 Govindan, K. and Soleimani, H. (2017). A review of reverse logistics and closed-loop supply chains: A Journal of Cleaner Production focus. Journal of Cleaner Production, 142. 371–384. 4 Paco, A. and Rapose, M. (2009). Green segmentation: An application to the Portuguese consumer market. Market. Intelligence and Planning, 27 (3), 364–379.

PREFACE

ix

interested in modifying their consumption behavior with less impact on natural resources, particularly fossil fuels,5 as the social dynamics is also contributing to the development of green energy. Consumers in the energy market today are committed with environmental protection through green electricity.6 Sustainable business widely depends on environment-friendly logistics and inventory management with low carbon emissions. The refrigerated transportation and inventory are more susceptible to environmental pollution than other ways of distribution sources. Freight transportation firms are facing mounting challenges of fuel consumption, and need to reduce the significant environmental imbalances that accrue from transport vehicles.7 However, most small and medium enterprises are observing a major fix between lowering the logistics- and inventory cost and stay price competitive in the market. The operations of freight transport industry in developing economies is highly competitive due to increased production and consumption coupled with government pressures to achieve sustainability. Therefore, eco-innovation has become the principal concern among the business corporations toward following the sustainable parameters to not only satisfy stakeholders’ values such as reducing negative environmental externalities, but also toward reaching governments’ green requirements and consumer demands.8 In the context of above discussion, most developing nations have promulgated comprehensive public policies to streamline corporate governance on implementation of sustainability-driven business model in all industries. Public policies are focusing on macro-economic disruption due

5 Chen, M. F. (2016). Extending the theory of planned behavior model to explain people’s energy savings and carbon reduction behavioral intentions to mitigate climate change in Taiwanemoral obligation matters. Journal of Cleaner Production, 112, 1746– 1753. 6 Strupeit, L. and Palm, A. (2016). Overcoming barriers to renewable energy diffusion: Business models for customer-sited solar photovoltaics in Japan, Germany and the United States. Journal of Cleaner Production, 123, 124–136. 7 Bektas, T., Ehmke, J. F., Psaraftis, H. N., and Puchinger, J. (2019). The role or operational research in green freight transportation. European Journal of Operations Research, 274 (3), 807–823. 8 Garcia- Graner, E. M., Piedra, M. L., and Galdeano, G. E. (2018). Eco- innovation

measurement: A review of firm performance indicators. Journal of Cleaner Production, 191, 304–317.

x

PREFACE

to sustainability issues in developing economies.9 Therefore, large companies are developing alliances with local governments on public–private partnerships (PPP) in implementing sustainability norms and enhancing social value. The PPP initiatives in various geo-demographic sectors have generated social awareness among people and inculcated the environmentally conscious consumption in the society. Environmentally conscious consumption is one of the key concerns in the modern society, and it is increasingly affecting the urban consumers. However, consumers often overstate their willingness to purchase environmentally conscious products; the global purchasing of these products is relatively low. Most research studies on environmentally conscious consumption suggest that the purchase intention is driven by intrinsic factors such as demographics comprising income, education and social status, consumer cognition, and personality attributes.10 In addition, external factors and social influences also affect an individual’s environmental consumption behavior. Most socially successful companies derive innovation ideas for sustainability projects from consumer driven resources. The customer-centric innovations are largely developed by the start-up enterprises by analyzing the customer needs within the niche market. Most of the innovations positioned in the premier niche markets are of high quality and high cost, while the innovations focused for the mass consumers in the local niche are of acceptable quality that deliver the value for money. The two factors- cost and marketability, drive the strategy of reverse innovation. Large companies roll over to the local markets to identify the customercentric innovations developed by the local enterprises and tend to evaluate the economics of their business projects. The primary challenge to developing innovations for emerging markets and catering to the customers therein is delivering solutions of adequate quality at a competitive price.11 Previous studies on social entrepreneurshipentrepreneurship have focused on the personality and background of the social entrepreneur and 9 Béal, V. (2015). Selective public policies: Sustainability and neoliberal urban restruc-

turing. Environment and Urbanization, 27(1), 303–316. 10 Tsarenko, Y., Ferraro, C., Sands, S., and McLeod, C. (2013). Environmentally conscious consumption: The role of retailers and peers as external influences. Journal of Retailing and Consumer Services, 20 (3), 302–310. 11 Rajagopal (2016). Innovative Business Projects: Breaking Complexities, Building Perfor-

mance (Vol.2)-Financials, New Insights, and Project Sustainability. New York: Business Expert Press.

PREFACE

xi

the entrepreneurial performance. The social entrepreneurs have unique characteristics including knowledge, cognitive capacities, and altruistic values. Social innovation is an interactive bottom-up collective learning process implemented through social enterprises. As a boundary-spanning activity across the public and private sectors, the interactive learning process and associated capability building for social innovation serves as a catalyst for wider social reform. Social innovations help value creation in emerging economies involving stakeholders and firms in the broader projects.12 This book categorically reviews the theories on sustainability, corporate social identity, and social values in context of the changing dynamics of sustainable business modeling practices. It also examines previous researches, and analyzes the strategic and tactical stewardship of firms for sustainable growth in global marketplace over time and space. In view of the above arguments, this book discusses the sustainable business ecosystems and business modeling, contributions of circular economy and production systems, green consumption behavior, cleaner energy perspectives, and sustainable logistics- and inventory management under the functional management section. In addition, discussions on public policy and business governance, conscious consumption and marketing strategies, innovation and technology, and social entrepreneurshipentrepreneurship constitute the business strategies section. Accordingly, this book is composed of nine chapters, each supported by applied examples and short cases. The chapters in this book are divided into three broad sections comprising The Founding Concepts, Functional Dynamics, and Moving Towards Shift. Chapter 1 introduces a framework of sustainable ecosystem for profit and not-for-profit businesses in the context of sustainable development goals. The principal discussion is on foundations of corporate sustainability, business ecosystem, sustainability commitments, sustainable business modeling, and corporate social responsibility. This chapter analyzes the current sustainable business models in the context of previous studies, and attempts to guide business leaders to create sustainable businesses. This chapter is broadly based on the triadic business management approach toward profiteering, corporate social responsibility, and 12 Rao-Nicholson, R., Vorley, T., and Khan, Z. (2017). Social innovation in emerging

economies: A national systems of innovation-based approach. Technological Forecasting and Social Change, 121, 228–237.

xii

PREFACE

attaining sustainability goals. Chapter 2 explores the concept and philosophy of circular economy and its applications in business and sustainability. The micro and macro indicators that determine the process and leverage of circular economy in managing cleaner businesses have been discussed in this chapter. The chapter also discusses the innovations, which support improving the management of sustainability issues, and the social capital and values in implementing various sustainability perspectives within circular economy system. Chapter 3 critically examines the corporate business policies on consumer education toward green consumerism. The endogenous and exogenous factors affecting consumer behavior toward sustainable consumption and the role of retailing and branding in building the behavioral orientation toward sustainable products and services constitute the core discussions in this chapter. In addition, this chapter analyzes the effects of consumer awareness on their behavior in the context of family health, wellbeing and social values. Chapter 4 deliberates on managing cleaner energy by discussion the energy business modeling, adaptation to innovations, and social management modeling for driving behavioral shifts to green energy consumption. This chapter discusses marketer’s perspective in the implementation of a green marketing program for a renewable electricity retailing. In the above context, eco-innovations, adaptability of renewable energy, consumption economics, servitization perspectives, and public policies on sustainable energy distribution are discussed in this chapter. Chapter 5 categorically discusses the economics of transportation and logistics, regionalization of transportation services, managing innovation projects, and logistics and inventory planning. The chapter discusses barriers and collective improvement strategies in the management of sustainable logistics and inventory services, in the context of circular economy concepts. Specific development initiatives on emission control, shifts in transport economics, delivery technologies, green inventory management, and logistics modeling that supports sustainable logistics and inventory management, are also discussed in this chapter. Chapter 6 broadly focuses on the topics of social and political governance, emerging perspectives on business and economics, business diplomacy and governance, and public policy on sustainability by regions (Spain, Mexico, and Brazil). The chapter critically examines global policies and local laws on governance of sustainability projects in the developing economies, and suggests redesigning governance model for implementing sustainability policies. The public–private participation, and community moves in the direction

PREFACE

xiii

of developing sustainable business model are also discussed as core topics in this chapter. The chapter also highlights the factors that force the local civil governance system to realize that it is necessary to change the way they are operating, in order to include the sustainability aspects within the operations of the local governance. Chapter 7 examines contemporary trends consumption of sustainable products and services, social consciousness, concept mapping and semantics, and marketing strategy for sustainable products. In addition, shifts in decision processes among consumers and socially conscious corporations, social and family factors affecting consumer preferences, and conformity factors on sustainable consumption are also discussed in this chapter. This chapter also reviews the research studies based on norm activation theory and the theory of planned behavior that argue new perspectives about the environmentally conscious consumption behavior. The ecological innovations strategies are discussed in the Chapter 8, which discusses complexities in eco-innovations, attributes of ecoinnovations and management, social marketing, and branding ecoinnovations. This chapter examines how ecological innovation can support sustainable manufacturing and society despite the traditionally low cooperation in developing economies. The role of frugalinnovations on sustainability needs, their branding and marketing strategies, and product value management are also addressed in this chapter. This chapter emphasizes on social marketing for sustainable products and services and contemporary strategies for branding eco-innovations. Chapter 9 discusses various aspects of social entrepreneurshipentrepreneurship, new trends in business modeling, and global-local effects of sustainable products and services. Discussions in the chapter focus contemporary explanations to social needs, social innovations, and organizational performance of social enterprises. The future business trends are also discussed in this chapter in the context of social entrepreneurshipentrepreneurship. This chapter discusses how contemporary social and technological developments would help the upcoming businesses in generating opportunities to combine resources, reach markets, and create community value. In view of the above arguments, this book discusses the sustainable business ecosystems and business modeling, contributions of circular economy and production systems, green consumption behavior, cleaner energy perspectives, and sustainable logistics- and inventory management under the functional management section. In addition, discussions on public policy and business governance, conscious consumption and

xiv

PREFACE

marketing strategies, innovation and technology, and social entrepreneurshipentrepreneurship constitute the business strategies section. Accordingly, this book is composed of nine chapters, each supported by applied examples and short cases. This book argues that most firms look for gaining competitive advantage in the marketplace by driving strategic moves, inculcating consumer consciousness on sustainability-linked marketing approaches. The trends in cleaner business decisions over the past generations determine the sustainable business models involving society, stakeholders, and consumers. Sometimes such profound changes are introduced in the niche markets, which creates chain effects in consumer awareness, consumption patterns, and yields macro effects in large markets. Often, sustainable choices of the companies lean toward developing competitive differentiations that enable consumers to realize the social values and loyalty shifts in the competitive marketplace. The book focuses on sustainability as the pivot of marketing and argues that commitments on sustainability in business leads to social impact, and emotionally helps companies in growing their image, brands, and socio-political reputations. The book discusses new strategies suitable for the companies to develop sustainable business in the emerging markets and to co-create strategies in association with the market players and consumers. This book significantly contributes to the existing literature, and serves as a learning post and a think tank for students, researchers, and business managers. Some of my research papers on business modeling and customer centric marketing in the emerging markets have been published in the international refereed journals that had driven new insights on the subject. Accordingly, filtered and refined concepts and management practices have been presented in the book that are endorsed with applied illustrations and updated review of literature on managing business in the overseas destinations. The principal audience of this book are working managers, and students of undergraduate and graduate management studies, research scholars, and academics in different business-related disciplines. This book has been developed also to serve as principal text to the under-graduate and graduate students who are pursuing studies in managing sustainable businesses, corporate governance, and social marketing. Besides serving as principal reading in undergraduate and graduate programs, this book would also inspire working managers, market analysts and business consultants to explore various solutions on international business

PREFACE

xv

management. This book fits into the courses of Business Management, International Marketing, Business in Emerging Markets, Managing Sustainable Businesses, Social Business modeling and New Product Management in various universities and business schools. I hope this book will contribute to the existing literature, and deliver new concepts to the students and researchers to pursue the subject further. By reading this book, working managers may also realize how to converge best practices with corporate strategies in managing business at the destination markets while students would learn the new dimensions of marketing strategies. Mexico City, Mexico July 2020

Rajagopal

Acknowledgments

The thought process in evolving this book originated from the couple of research studies on sustainable consumption patterns in emerging markets, which I conducted in the recent past. These studies were developed on the principles of design-based research (DBR) with the qualitative methodology. The output of these research studies was discussed in the classroom of MBA program at EGADE Business School and Boston University during 2019–2020. The narrative outputs and storyboards on the sustainable practices have given many insights that emerged as a central theme of this book. I have also benefitted by the discussions of my colleagues within and outside the EGADE Business School and Boston University. I am thankful to Dr. Lou Chitkushev, Associate Dean and Dr. John Sullivan, Chair of Administrative Sciences Department, Metropolitan College of Boston University for giving me teaching assignments, which enabled me to apply the research output on sustainabilitybased business modeling in the classes. I would like to acknowledge the support of Dr. Osmar Zavaleta, National Research Director, and Dr. Raquel Castaño, Associate Dean, EGADE Business School, who have always encouraged me to take up new challenges in teaching graduate courses, develop new insights, and contribute to the existing literature prolifically. I also enjoyed discussions with the corporate managers on the subject, which helped in enriching the contents of this book. I am thankful to various anonymous referees of our previous research works on globalization, consumer behavior, and marketing strategy that

xvii

xviii

ACKNOWLEDGMENTS

helped in looking deeper into the conceptual gaps, and improving the quality with their valuable comments. Finally, I express my deep gratitude to Arati Rajagopal who has been instrumental in completing this book. I acknowledge her help in copy editing the first draft of the manuscript and for staying in touch until the final proofs were crosschecked and index was developed.

Contents

Part I The Founding Concepts 3

1

Sustainability in Business

2

Circular Economy and Production Systems

35

3

Green Consumerism

67

Part II Functional Dynamics 4

Cleaner Energy Consumption

103

5

Sustainable Logistics and Inventory Management

129

6

Public Policies and Sustainable Business Governance

159

7

Conscious Consumption and Marketing Strategy

179

xix

xx

CONTENTS

Part III

Moving Towards a New Shift

8

Eco-Innovation and Technology

203

9

Social Entrepreneurship and New Business Trends

235

Index

251

About the Author

Rajagopal is a Professor of Marketing at EGADE Business School of Monterrey Institute of Technology and Higher Education (ITESM), Mexico City Campus and Life Fellow of the Royal Society for Encouragement of Arts, Manufacture and Commerce, London. He is also Fellow of the Chartered Management Institute, and Fellow of Institute of Operations Management, United Kingdom. Dr. Rajagopal is serving as Adjunct Professor at Boston University, Boston, Massachusetts since 2013 and is also engaged in teaching courses at the UFV India Global Education of the University of the Fraser Valley, Canada. He has been listed with biography in various international directories. He offers courses on Competitor Analysis, Marketing Strategy, Advance Selling Systems, International Marketing, Services Marketing, New Product Development, and other subjects of contemporary interest to the students of undergraduate, graduate, and doctoral programs. He has imparted training to senior executives and has conducted over 65 management and faculty development programs. Dr. Rajagopal holds Post-graduate and doctoral degrees in Economics and Marketing respectively from Pandit Ravishankar Shukla University in India. His specialization is in the fields of Marketing Management, Rural Economic Linkages and Development Economics. He has to his credit 63 books on marketing management and rural development themes and over 400 research contributions that include

xxi

xxii

ABOUT THE AUTHOR

published research papers in national and international refereed journals. He is Editor-in-Chief of International Journal of Leisure and Tourism Marketing and International Journal of Business Competition. Dr. Rajagopal served as Regional Editor of Emerald Emerging Markets Case Studies (2012–2019), published by Emerald Publishers, United Kingdom. He is on the editorial board of various journals of international repute. Currently Dr. Rajagopal holds the honor of the highest level of National Researcher-SNI Level- III. He has been awarded UK-Mexico Visiting Chair 2016–2017 for collaborative research on ‘Global-Local Innovation Convergence’ with University of Sheffield, UK, instituted by the Consortium of Higher Education Institutes of Mexico and UK.

List of Figures

Fig. Fig. Fig. Fig. Fig. Fig. Fig.

1.1 1.2 2.1 2.2 3.1 3.2 4.1

Fig. Fig. Fig. Fig. Fig.

4.2 5.1 5.2 6.1 7.1

Elements of business ecosystem Elements of sustainability linked business modelling Business modelling canvas in circular economy environment Attributes of innovation ecosystems and sustainability Attributes and process of consumer behavior Ecosystem of sustainable consumption practices Business modelling for green and renewable energy marketing Adaptation to green energy: attributes and effects Demand and supply functions of transport economics Ecosystem of sustainable innovation projects Taxonomy of governance in sustainability projects The process of developing sustainable consumption behavior

10 20 40 47 74 84 108 119 136 150 169 183

xxiii

PART I

The Founding Concepts

CHAPTER 1

Sustainability in Business

This chapter introduces a framework of sustainable ecosystem suitable to for-profit and not-for-profit businesses in the context of sustainable development goals (SDGs). Sustainability philosophy of corporations fosters innovations in social businesses and encourages codesigning of sustainable business model. A process of systemic thinking needed to develop socially sustainable business modeling has been discussed in this chapter. Discussion on corporate social responsibility as an effective tool in implementing the business models linked with sustainability goals is central to this chapter. The new paradigm suggested in this chapter contrasts with the linear approach commonly used in business and other disciplines. This chapter analyzes the current sustainable business models in the context of previous studies, and attempts to guide business leaders to create sustainable businesses. The chapter also discusses how a sustainable business model could provide profit-oriented business with a commitment to corporate social responsibility and sustainability. Sustainability has emerged as a key concern for the companies, from the local origin firms to multinational corporations, to improve business processes, pursue growth, and determine effect social and economic value additions. Most companies are following pro-sustainability business philosophy to gain corporate citizenship reputation rather than focusing on their brand personality alone. Consequently, companies are taking actions to employ various sustainability measures to enhance the social, economic, and political dimensions of business such as reducing energy © The Author(s) 2021 Rajagopal, Sustainable Businesses in Developing Economies, https://doi.org/10.1007/978-3-030-51681-9_1

3

4

RAJAGOPAL

usage (environmental factor) and reducing waste in operations (ecology, emissions, circular economy, and green business conditions) ahead of the concerns on corporate reputation management. Companies engaged in implementing sustainable measures in business are practicing on judicious use of water and managing green value chain throughout the process starting from manufacturing to the supply of products to the end-user. The underlying objectives of large companies are to leverage the sustainability effects on existing products not only to acquire new customers, but also to achieve higher prices and market share from the sustainability-led brands (Bonini and Gorner 2011).

Foundations of Corporate Sustainability Sustainability is a sociopolitical driver that governs the business philosophy to build green effects in manufacturing, marketing, supply chain, innovations, and technology management. Businesses embedded with sustainability concerns enhance customer engagements and customer value to support the corporate citizenship goals of a firm. However, environmentalists and social activists have often argued that the sustainability measures adopted by large manufacturing companies (industrial and consumer products) are not sufficient. Environmentally conscious companies run their businesses in a socially- and economically responsible fashion by engaging stakeholders and employees. Small and medium sized companies face resources limitation in developing and implementing a sustainable business model, though most entrepreneurial leaders know and feel the importance of making their businesses sustainable. To overcome obstacles in sustainable business models, companies need to consider a roadmap to circumvent them. Sustainability involves creating value for all stakeholders within the business ecosystem, and contemplating profits with value creation. Sustainability also requires a business to look at its entire value chain. Entrepreneurial and corporate leaders need to drive the sustainability initiatives and call for the employee and stakeholder involvement. Such integration of roles in the implementation of business models helps not only in creating social values to endorse corporate citizenship, but also in establishing clean production and corporate governance (Bhattacharya and Polman 2016). Most companies pursue sustainability as a project to deliver corporate social responsibility. Sustainability projects add to the operational and

1

SUSTAINABILITY IN BUSINESS

5

overhead costs of the company but deliver no immediate financial benefits. Consequently, though sustainability is a matter of public concern and is governed by public policies, companies often give low priority to social sustainability projects as they do not directly contribute to the profitability and market competitiveness. Companies with green business philosophies such as automobiles, energy, textile, and paper products have begun to transform the manufacturing process alongside the competitive landscape. These companies redesign products, technologies, processes, and business models through social enterprises to deliver the social value for their products and services (Nidumolu et al. 2009). Despite the success of some sustainable business models implemented by the manufacturing and operations companies, small, medium, and large-scale companies in regional settings are struggling with the challenge of integrating environmental plans into their core business strategies. Local companies develop lowcost sustainability projects with an objective with restricted outreach to stakeholders. Sustainability has emerged as a megatrend for businesses in the twenty-first century. Companies plan transformative changes in organization to create social values across the competitive marketplace (Lubin and Esty 2010). Emerging companies design and implement sustainability programs as pragmatism, while the large and long-standing companies implement sustainability programs out of idealism. These companies have consistently generated significant growth rates and profit margins with the sustainability programs irrespective of their size and destination. Companies with sustainability objectives take a futuristic view and invest in social operating methods that lead to lower costs and higher yields. Companies tend to make local adjustments in sustainable social programs to generate savings in cost, which then identify local administrators for managing these projects. Sustainability projects are sometime co-funded by the companies and local governments to support operations with advanced technologies and to coevolve business models. Collectively, these companies with socially responsive organizations demonstrate trade-off between sustainability and financial performance. The pursuit of sustainability therefore, has emerged as a powerful path to grow business enterprises with social values (Haanaes et al. 2013). The concept of systems thinking, in which the business operates as a system in contrasts with the linear approach, commonly used in business and other disciplines to manage the business operations in a systematic way. This approach explains what

6

RAJAGOPAL

might cause an action or reaction but ignores any feedback effect between the subsequent action and its cause (Sun et al. 2018). Sustainability-based business models have emerged rapidly with global and local companies. Such business propositions have been extensively supported by the public policies in developing countries. Consumer education on sustainable products has increased over time, and they are seeking out sustainable products by transforming the competitive scenarios across the destinations, which forces companies to change their products, processes, technologies, and business model (Goni et al. 2017). The trend of sustainability has encouraged both high-and low- investment companies. The dominant belief about creating and developing sustainable business model in the customer-centric and industrial-marketing companies is driven by the idea of solving environmental and economic issues and providing high social values. The response of public policies helps in developing sustainable business models through social guidelines to move their businesses toward green and circular economy (Evans et al. 2017). Innovating the sustainable business model is about creating superior customer- and firm value by involving stakeholders and market players such as supply chain and packaging partners. Sustainable business model of a company addresses societal and environmental needs through integrated business operations. Ecosystems of different business models are specific to the purpose and the corporate goals of the companies. Some companies that grow with social innovation objectives have a greater number of qualitative designs encompassing social needs, stakeholder education, user value generation, and bridging the corporate social responsibilities. Social sustainability manifests itself in corporate culture, organizational behavior, and functional practices of companies. Sustainable business models are spread longitudinally; so, they are bound to face unforeseen risks which need to be managed in association with the stakeholders. However, companies must engage in mapping the performance of pilot business-experimentation models (Rajagopal 2020b). A new commercial reality in today’s global marketplace is the rapid shift in consumer behavior due to the emergence of dynamic disruption of innovation and technology in consumer products on a previously unimagined scale of magnitude. Environmental sustainability and consumption of green products has driven the world toward converging openness, transparency, and commonality. Sustainable business models are proactive to the systematic patterns of regulatory, social, or voluntary practices that

1

SUSTAINABILITY IN BUSINESS

7

tend to generate social and commercial value on the business investments. Sustainable business models of textiles, energy, and telecommunication industries have played transformational role within and outside their industries (Schaltegger et al. 2016). Companies functioning with sustainable innovative business model succeed in developing multi-stakeholder values, engagements, and operational alignments. Sustainability is a consistent philosophy among business organizations. However, their operational boundaries change across companies, stakeholders, and socioeconomic values. Companies employ different sustainable business model initiatives from for-profit and non-profit organizations by developing alignments among various players at normative, instrumental, and strategic dimensions in order to achieve sustainable value creation. However, during the implementation of sustainable business models, companies face complexity for alignment of value, diverging interests, investment risks, profitability, and corporate responsibilities. Multi-stakeholder engagement in implementing sustainable business plans enhances envisioned and perceived values in large companies. Most customer-centric firms are engaged in radical forms of reorganizing the business model to create perennial values, while conventional business models focus on satisfying customer needs and maximizing their returns. Sustainable business models integrate multiple dimensions of economic, social, and environmental value, and adapt to customer-centric strategies (Bocken et al. 2015). Sustainable business models include corporate strategies on development of new value propositions, delivery networks, and value augmentation approaches. Sustainable business models emphasize on stakeholder relationships through value creation for customers, suppliers, or other business partners (Boons and Lüdeke-Freund 2013).

Business Ecosystem Continuous disruptions caused by frugal and radical innovations in the consumer- and industrial markets and business processes pose challenges to the contemporary business ecosystems. Disruption of products and services are rapidly increasing in the emerging markets that affect the performance of companies in an industry. Business ecosystems are protected with public policies and robust strategies of companies within industries, which operate around various subsystems including sociopolitical, socio-technical, economic, and entrepreneurial. Such ecosystems

8

RAJAGOPAL

like China, India and Brazil are able to manage short term, sporadic market instabilities and geo-demographic variations in consumption trends (Ramezani and Camarinha-Matos 2020). Large companies that collaborate with local enterprises to manage frugal and reverse innovations for implementing sustainable social responsibilities develop competence to cope with severe disruptions, and survive or even thrive in a context of volatility and uncertainty. Such practice builds collaborative business ecosystem, which emphasizes the collaborative perspective of sustainable business modeling (Graca and Camarinha-Matos 2017). Business ecosystems involve multiple players of different types and sizes in a market, industry, or region to create value, develop economies of scale in manufacturing, and serve the markets with maximum capacity. Such business ecosystem has diverse objectives and operations. Their collective ability to learn, adapt, innovate, and coevolve businesses within socioeconomic subsystems constitutes the key determinant of their longer-term success. Ecosystem exhibits important intervening variables in business, which influence creating new value-chain in the society and among market players. The value perceptions in social business ecosystems are driven by shared interests, goals, and values. Companies collaborate with local companies to meet the increasing customer demands in niche and to invest in the long-term sustainability projects like eco-conservation, public health, and housing, which can derive mutual benefit. Business ecosystems based on social and public economic goals are dynamic, which coevolve with communities of diverse actors who serve to the social responsibilities, and create and capture new value through increasingly public–private partnership models (Kelly 2015). Companies like Nestle (Organic coffee cultivation in Columbia) and Unilever (empowering rural women in India) could lead the market competition in specific consumer products segments in the regional markets. Nestle continued to be the market leader until 2016 in Latin America, and Unilever is projected to be the market leader in consumer products segment until 2020. Successful companies develop transactional alliances and legal business partnerships with local partners. These companies also invest in developing community buy-ins and in long-term personal relationships based on mutual trust. Companies that create high corporate value through social embeddedness by implementing codesigned corporate social responsibility projects, make them competitive to lead in the market for long term (Rajagopal 2020a).

1

SUSTAINABILITY IN BUSINESS

9

Strategic thinking in organizations has driven the concept of sustainable strategic management through coevolution involving society, stakeholders, and employees of a firm. Socially and ecologically responsible firms tend to explore sustainable socioeconomic opportunities within the proximity of their operations. The socioeconomic, technological, and cultural business ecosystems have emerged as foundation for implementing sustainable strategic management strategies. Such business ecosystem functions effectively in a reverse organizational pyramid with stakeholders on the top, and coevolves with social sustainability objectives in developed-, developing-, and undeveloped markets. Both the business ecosystem leaders and players in local markets play critical roles in formulating and implementing potentially profitable strategies. Business ecosystems converge social needs, sustainability goals and the quality of human life in the coevolved business models. Ecosystem leaders of large companies are responsible for creating and stewarding the sustainability perspectives while niche-based firms invest in social and sustainability-led innovation to make the vision of the industry (including large companies), a reality (Stead and Stead 2013). The principle business ecosystem and its subsystems are discussed in Fig. 1.1. Business ecosystem has six core elements embedded with six relational subsystems as illustrated in Fig. 1.1. The core elements constitute stakeholders, society, innovation, and technology, macroeconomic factors, sustainability, and corporate governance. Crowdsourcing or collective intelligence has emerged as a dynamic tool in the business ecosystem today, which is supported by the stakeholders. They support companies in co-creation and coevolution process with stakeholders through social interaction, social innovations, and social governance. Business ecosystems linked with the sustainability goals drive public–private entrepreneurship (collaborations) to meet the sustainable development goals through social- and frugal innovations. Taxonomy of leadership and employee engagement largely drive the corporate governance practices as central to the business ecosystem. Among various subsystems associated with the core business ecosystems, stakeholders are influenced by the cognitive subsystem comprising perceptions, emotions and socialinteractivities. Social and innovation subsystems include social values, entrepreneurship education, and utilitarian innovations. Management of resources and factors of production, procurement, and transactions of public goods constitute some significant factors of macroeconomic

Enterprises-Stakeholders-Society-Technology-Public Governance

Macroeconomic Subsystem Public-private funding Factors of producon Tax structure Procurements, transacon cost Public goods Local-global relaons

Innovaon and Technology Subsystem Entrepreneurship educaon Knowledge management Digizaon and crowdsourcing Innovaon sponsorship Networks and plaorms Ulitarian innovaons Cost-Time-Risk factors

Sustainability Subsystem Natural resources subsystems Territorial subsystem Social and cultural subsystem

Macroeconomic Factors Resources management Infrastructure Fiscal policies Trade agreements Public policies

Sustainability Green concepts Public-private partnership Compliance with SDG Circular economy

Corporate Governance Role of stakeholders Leadership Decision-making Financial administraon Employee engagement

Social Subsystem Social needs Social learning Social Values

Innovaon and Technology Frugal innovaon Reverse innovaon Technology lifecycle Transfer of technology

Society Social interacons Social innovaon Corporate cizenship behavior Social governance

Stakeholders Collecve intelligence Co-creaon Co-evoluon Empowerment

Fig. 1.1 Elements of business ecosystem

Boom-up strategy Organizaonal culture Corporate philosophy Business ethics Connuous learning Corporate Governance Subsystem

Business Ecosystem

Stakeholder Subsystem Percepons, beliefs, & values Emoons & self-reference Movaon Experience sharing Social media interacvity

10 RAJAGOPAL

1

SUSTAINABILITY IN BUSINESS

11

subsystem. However, territorial subsystems also affect the business ecosystems as exhibited in Fig. 1.1. In the context of an industry, business ecosystem is a community comprising various levels of interdependent firms that tend to coevolve in an ongoing business cycle and constantly renew their business configurations. The business cycle of a firm is largely affected by political, economic, social, technological, and legal subsystems. In view of the ecosystem discussed above, the coevolutionary process of business modeling consists of co-vision, codesigning, and co-creation as the domains of activities (Liu and Rong 2015). The innovation subsystem within the broad business ecosystem is built upon the knowledge of stakeholders in creating and sharing their experiences across companies. In addition, knowledge institutions, policy regimes, business enterprises, and industry boundaries also contribute to the innovation subsystem. Public policies and government play an important role in promoting local innovation and forming innovation ecosystem to support social and sustainable business models (Ma et al. 2019. Consumers also play a significant role in the innovation subsystem by co-creating products that add value to the social sustainability. Endusers share insights on low-cost innovations and the possible ways of their utility with the consumer communities. The consumer-led social innovations are supported by public policies and encouraged through the non-governmental organizations and public–private participation. Endusers contribute to the innovation processes by contributing to the design perspectives and stimulating demand of the innovative product. Thus, stakeholders, corporate managers, and policymakers remain apprehensive about the potential of end-users driving sustainable innovation (Nielsen 2020). Social innovations emerge as the product of social entrepreneurs driven by the knowledge-intensive social needs and contextual services. Social innovations are often addressed to the non-profit sector such as social health, natural resources management, farming activity, and domestic energy, which are sometimes referred as the social policies and economy. Companies develop sustainable business models by critically examining the inputs of innovation subsystem and socioeconomic resources. Innovation subsystem largely evolves within the geo-demographic niche and uses initially cost-effective local resources; and it later transforms to commercial propositions in alliance with large organization (Dionisio and Raupp de Vargas 2020). Continuous growth in technology has stimulated digital innovations in the social, sustainable, and industrial

12

RAJAGOPAL

business sectors. As digital innovations expand, many small and medium businesses tend to seek partnerships with technology companies to maintain competitiveness among innovative products and services within the digital sphere. But some companies find greater success through an adaptive ecosystem model, by stimulating business collaborators to develop innovations linked business projects, instead of a business-to-business partnership. Such strategy requires collective intelligence, flexibility, and collaboration of stakeholders and firms in the innovation process (Furr and Shipilov 2018). Firms consider collaborative innovations as the most effective source of business modeling today. Collective intelligence plays significant role in ideation process and in managing the demand of innovative products in the initial stages of market. Crowdsourcing categorically delivers the relevant knowledge in innovation and business modeling process by addressing consumer problems and offering solutions. Previous studies suggest that three distinct types of crowdsourcing can be used to solve the problems of differing scope and complexity, and to generate opportunities for innovation (Williams et al. 2020). The innovation business modeling through collective intelligence can be built using three distinct types of crowdsourcing comprising search crowds, wired crowds, and crowd teams. Acquiring financial resources for micro, small, and medium enterprises is one of the major challenges within the microeconomic subsystem of the business ecosystem. Crowdfunding and public–private financial partnership have emerged as new modalities in exploring financial resources for these enterprises. The sustainable business goals have shown added advantage in tapping the public and private financial resources for coevolving small enterprises with large business houses with an industry domain. The small and medium enterprises need financial support longer than normally expected by the financial markets as their business growth is often jeopardized due to shifts in consumer preferences and market competition. The financial requirements in these enterprises are associated with the lifecycle of firm in lieu of the need of the project-based capital resources. Financial needs for these firms can be assessed in the context of their correlation among the age of the firm, capital requirement, and financing costs. The cross-sectional age profile and financing costs of the firm are hump-shaped that explains their growth as business cohort in the region. However, the long-term effects of lifecycle-based financing demonstrate that financing costs decrease monotonically as the firms move over the different stages of

1

SUSTAINABILITY IN BUSINESS

13

lifecycle (start, growth, maturity, and aging). These firms are more dependent on financial intermediaries of business lifecycle to make optimum use of credit linking to productivity and gain desired market share (Ylhäinen 2017). Crowdfunding has emerged as one of the new popular ways to find financial resources for innovative firms of small and medium size in local settings. Firms have conceived this approach as a creativity support tool to raise public funds through web-based technology and online payment systems for simplified transactions. The crowdfunding projects are driven by various motivations such as frugal innovations, social benefit, and Fintech ventures (Buttice et al. 2017) Epistemologies and practices on public investments, social equities, and social capital are addressed under this theme. Psychosocial behavior of nonprofit organizations makes significant contribution in raising and managing funds through the crowdfunding projects. The social objectives of crowdfunding often embed emotions and storytelling, which works as a compelling and effective strategy for engaging stakeholders for funding behaviors (Woodside et al. 2008).

Sustainability Commitments Broad sustainability development goals, which call for global political and business partnerships across the countries and industries, are set by the United Nations around the social, economic and industrial sectors. There are seventeen Sustainable Development Goals (SDGs), which call for an integrated action in a global partnership between developed and developing nations. In implementing strategies to achieve SDGs, corporate commitments play a significant role, which helps in streamlining the global socioeconomic and environmental agenda with business policies and governance. The sustainability commitments of business houses recognize poverty and other deprivations as hidden obstacles in improving the business performance from the point of view of socioeconomic perspectives. The corporate commitments on SDGs must go hand in hand with the global strategies that aim to improve health and education, reduce inequality, and spur economic growth. Achieving these sustainable development commitments help in improving the social and ecological facets of various business and industrial sectors. Committing on reaching out the SDGs, manufacturing sector would significantly contribute to the climate change strategies and improve the planetary environment.

14

RAJAGOPAL

In order to meet the above commitments, business organizations are augmenting their ability to integrate, build, and reconfigure internal and external competences to address the growing need for planning and implementing enhanced corporate social responsibility goals (Teece 2018). The commitment on SDGs drives companies toward putting their efforts in sensing the areas of social and environmental needs by identifying and assessing opportunities and mobilizing adequate capital resources to address opportunities and capture value. Companies invest resources and engage human capital in transforming the organizational capabilities as learning organization, which enables their dynamic capabilities to adjust, recombine, and create ordinary capabilities matching with the social and environmental needs (Harreld et al. 2007; Teece 2018). Large companies invest in strengthening their strategies on corporate social responsibilities to ensure compliance with the SDGs and augment social values in business. The crucial role of corporate reputation is observed in the mitigation of vulnerability of the young-companies. Firms involve employees and stakeholders in managing corporate social responsibility and capitalize on its own corporate reputation. In addition, the corporate social commitment in the context of SDGs drives corporate social performance and promotes local-global business opportunities. However, entrepreneurs perceive high risk of engaging in the activities targeted toward corporate reputation in short term as it takes a long time to accrue social benefits and values, and exhibit the benefits of corporate social responsibilities. The transaction cost theory explains the links between company’s reputation, degree of risk, and effective cost of production (Tate et al. 2011). Deployment of the strategy of corporate social responsibility, and its external influence increase the corporate brand-image and enhance the achievement of an adequate and sustainable profitability. Organizations are increasingly focusing on sustainability as an important element for developing business strategies to achieve societal value led business performance. The role of innovation, manufacturing, marketing, purchasing, and supply functions has become critical in translating sustainability commitment into performance. Among many factors, the impact of sustainability commitment on various manufacturing and business operations, processes and routines depend on the organizational capabilities. Nonetheless, the business performance varies by industry, regions, and societal values, which are largely under-explored. From a resource-based view perspective, it has been argued that commitment

1

SUSTAINABILITY IN BUSINESS

15

to sustainability leads manufacturing and business functions to develop intra- and inter-firm collaborative capabilities within the social environment, which in turn forces organizations to enhance their organizational capabilities and competencies to deliver improved performance (Luzzini et al. 2015). Most large and medium companies are committed to the sustainability practices, which have consistently been driven by the need to contribute in social value of business and reduce the negative impact of for-profit corporate philosophy. The for-profit philosophy focuses on business growth and expansion with no philanthropic and social concerns. The sustainability commitment allows companies to invest in not-for-profit projects by advancing into the global sustainability agenda across the three bottom lines comprising economic, environmental and social sustainability. Benefits of sustainability and green organizational practices in manufacturing, services, and facilities management are measured by substantial reduction in wastes (waste management), increased productivity and social values through efficient work practices, and optimization of consumption of natural resources (Ikediashi et al. 2020). Commitment to sustainability is a common responsibility that involves partnership of state, public, and private sectors. Socially enlightened corporate sector tends to meet the sustainability commitments by involving stakeholders and raising crowdsourced funds in addition to that of the organization. Collective intelligence helps companies monitor social sustainability projects with sense of public commitment and deliver social values. Consequently, companies utilize independent incentives through channel relationship commitment, which determines performance of sustainability projects. In addition, crowdsourcing, corporate funding, and social incentives appear to be more effective in promoting sustainability commitment (Sheu and Hu 2009).

Sustainable Business Modeling The growing concerns of circular economy and circular business have reoriented companies toward developing sustainable business models with effective social value-chain management. Circular economy encourages sharing of ideas, processes, and outcomes that are widely connected with sustainability projects. Sharing the economy of consumers, stakeholders, and society related to the consumer products companies encourages them to develop sustainable business model. Most companies are engaged

16

RAJAGOPAL

in building and implementing sustainable business models in the social interest that helps in value-chain creation and acquiring new customers. While sharing sociocultural attributes of geo-demographic segments has been a long-standing practice in society, the sharing economy is used as an umbrella concept to exhibit broad range of disparate consumption practices and organizational models (Habibi et al. 2017). The value proposition of both customers and social communities contributes significantly in the sustainable business modeling process. Value proposition describes the attributes of product/service offering, the customer segments, and their relationship in the social deliveries, while value creation and delivery describe how value is provided to customers (the channel efficiency and value delivery process), including the structure and activities in the value chain (Osterwalder and Pigneur 2010). The success-driven social sustainability dimensions of corporate culture include sustainability-strategy and leadership, mission, communication and learning, social care and work life, and loyalty and identification. In addition to other indicators related to measurement of the business performance of a company, the indicators mentioned above are taken into consideration for a company to be classified as financially successful. Collaborative and longitudinal approaches over phased project timeline work better to create and measure the impact of sustainable business models on environment, society, economy and other key stakeholders. Hence, a systemic form of sustainable business model can be developed to ensure clarity in propositions and constructs, and make geo-demographic expansion possible. Sustainable business models are spread longitudinally, so they are bound to face unforeseen risks which need to be managed in association with the stakeholders. Creating Shared Value (CSV) serves as the fundamental guiding principle for consumer-centric companies. Sustainable development can be easily integrated into business activities by creating shared values. Such business models with focus on sustainability are increasingly attracting long-term investors and involving unrelenting stakeholder participation. CSV brings business and society together by generating values for the local livelihood economy, global economic concerns, and value for society (Rajagopal 2020b). Sustainability-driven companies make sustainable choices on prioritizing social and environmental elements in developing business models and make them visible to the consumer as product- or service attributes. Such marketing strategies are embedded in the business models as part of the value proposition. Marketing strategies that are backed by social

1

SUSTAINABILITY IN BUSINESS

17

choices converge key partners, activities, and resources in the business model. The social products are marketed to customer with value propositions, which delivers utilitarian values upon purchasing the products or services. Consequently, customers develop perceived value consistently, which later develops loyalty for brands. The sustainability-linked business modeling, therefore, relies significantly on the value proposition (Pal and Gander 2018). Social sustainability is manifested in corporate culture, organizational behavior, and functional practices of the companies. In order to create and measure the impact of sustainable business models on environment, society, economy, and other key stakeholders, collaborative and longitudinal approaches over phased time-span work better. Successful businesses in manufacturing and service sectors tend to understand the challenges and opportunities linked to business transition toward sustainability in a society today. They create considerable awareness on the environment and green consumption practices in the society (Rajagopal 2020b). Consumer-centric companies are engaged in sustainable agriculture, developing green by-products emerging from ecological conservation projects. Stakeholders contribute significantly in developing sustainability projects with the companies, and in carrying out the implementation of projects at the field level. Accordingly, stakeholders collaborate, co-create, and co-manage sustainability projects. Value perceptions of sustainability projects integrated into business model innovations are closely associated with the development needs, economic growth, and quality-of-life improvement of society in general and stakeholders of the company in particular. Sustainable social development projects have spanned over long time and their measurable impact is longitudinal. Companies look for return on investment made in sustainable social development projects sooner or later. Therefore, integrating sustainable social development projects into business model(s) is the only option for the companies. Among the elements of canvass, measuring cost-time-risk (CTR factors), key partners, possible shared resources, predetermined revenue stream and its management, social value generation, investment on socialinnovation, and analyzing market trends make significant contributions (Rajagopal 2020b). Sustainability-based business models are developed and implemented by most companies at the corporate level by applying uniform strategies across their subsidiaries with marginal field level adjustments. However, multi-domestic companies operating with the subsidiaries in different

18

RAJAGOPAL

destinations with a definite focus on manufacturing and marketing tend to develop homogeneity in the business models for implementation. For example, Nestlé has uniform social sustainability business models toward organic coffee cultivation, green curing of coffee, and dairy farming practices in Latin American, African, and Asian destinations. The boundary-spanning sustainability-based business models have different types of organizational boundary changes between the subsidiaries and their external stakeholders as these business models seek exploring, negotiating, disrupting, and realigning organizational boundaries. The complexity for alignment can be seen through different ways of perceiving the stakeholder and societal values, serving to diverging sustainability interests, risks and responsibilities, and connective efficiently with the existing processes and activities. Openness for strategic alignment of business models with stakeholder needs, culture, and societal values significantly affect the implementation of sustainable business models (Velter et al. 2020). As the business environment is changing rapidly, the performance of sustainability-based business models is turning complex. Seamless implementation of business projects has taken a long time to gain the social value as its stakeholders initially found it difficult to adapt to the change from conventional to digital or self-service technologies. However, a wellimplemented business model allows a company to gain economic value by providing social and environmental benefits over time (Schaltegger et al. 2016). Managing sustainability-linked business models refers to the approaches dealing with social, environmental, and economic issues in an integrated manner to transform businesses that create social values and equity of brands of the company. Such business models contribute to sustainable development of the economy and society within the ecosystem. Accordingly, a sustainability-based business model describes the design, delivery, and capture mechanisms to create social value. It emphasizes stakeholder and customer needs and defines ways through which companies deliver value to them, invests in value creation, and cocreates resources through the proper design and operation of the various elements of the value chain (Teece 2010). Implementation and governance of sustainability-based business models are shared through public–private partnerships. In addition, stakeholder-driven governance forms such as cooperatives, public–private

1

SUSTAINABILITY IN BUSINESS

19

partnerships, or social businesses help companies transcend narrow profitmaximizing models. The business models are analyzed from a sustainability perspective to overcome the economic, social, and technological bias of sustainability approaches. Accordingly, entrepreneurial approaches are designed in improving social sector, and operate through a typology of “isolated” and “interactive” business models categorically in geodemographic market segments (Sánchez and Ricart 2010). The practice of developing sustainability-linked business model has dyadic leverage for companies and society and listed below: • It stimulates new approaches in the corporate sustainability management and sustainable entrepreneurship, and • Its conventional experience strengthens the business paradigm of social value creation The value proposition embedded in these business models provides ecological, social, and economic values through sustainable products and services, while business infrastructure enables the sustainable supply chain management to operate with public–private partnership and involving stakeholders and corporate resources. The customer interface during the implementation of business models enable direct relationships with stakeholders, key partners, and public systems, and share responsibility of production, services, and consumption systems (Boons and LüdekeFreund 2013). The attributes of sustainability-linked business modeling is illustrated in Fig. 1.2. The emerging and existing companies are engaged in working with innovative business models respecting society and environment to stay competitive in the marketplace. Trends like circular economy, business waste control (manufacturing, packaging, logistics, and inventory wastes), value-oriented recycling under growing consciousness of circular business, and the sharing economy are some of the many sustainable entrepreneurial approaches. Figure 1.2 explains the framework of attributes associated with the sustainable business modeling process. Among others, design-to-market , design-to society, and design-to-value are the three principal emerging concepts that guide the sustainable business modeling process. Convergence of these concepts is a major challenge in building sustainable business model and ensuring its effective implementation. Corporate goals, objectives, and philosophy drive the anatomy of

Sustainable Business Modelling

Social Needs, Processes, and Values

Corporate Goals, Objecves, and Philosophy

Micro Factors Task priorizaon Geo-demographic effects Social values and lifestyle

Macro Factors Ecology and environment Social sectors Public policies

Micro Factors Value-chain creaon and delivery Leadership taxonomy Partnership and performance

Macro Factors Circular economy Circular business Shared economy

Fig. 1.2 Elements of sustainability linked business modelling

Social awareness Knowledge ergonomics Community cognion Social governance

Design to Market Design to Society Design to Value

For-and not-for-profit objecves Vision and mission-learned-acquired Corporate-social foundaons Philanthropic orientaon

Cost-me-risk factors Strategic alignment Servizaon Social empowerment

Social innovaon Social entrepreneurship Co-creaon and co-evoluon

Collaborave projects Innovaon and technology Stakeholder engagement

Capital resources Infrastructure Strategy and milestones

Systems thinking Deliverables and values Decision-making

Frugal innovaon Reverse innovaon Collecve intelligence

Corporate social responsibility Employee engagement Work culture and autonomy

Global-local congruence Corporate-social convergence Performance with purpose

20 RAJAGOPAL

1

SUSTAINABILITY IN BUSINESS

21

such business model on one hand, and right assessment of social needs, processes, and value propositions strengthen the business models on the other. There are macro- and micro business environmental factors that affect both corporate and societal domains. Corporate goals, objectives, and its underlying philosophy is affected by the emerging concerns on circular economy, circular business, and shared economy as macro factors. There are micro-environmental factors that influence sustainable business modeling process comprise value-chain creation and delivery, leadership taxonomy through the sustainable business modeling and implementation process, and public–private partnership and performance. Companies engaged in developing business models embedded with sustainability objectives, need to strengthen capital resources and infrastructure to ensure achievable milestones through right strategies. These companies divide the long-term business plans into rolling plans of shorter duration and operate through collaborative projects by engaging stakeholders. Emerging consumer- and industrial-marketing companies focus on innovation and technology to stay abreast with the market trends, social needs, deliverables, and contemplating values while implementing the business plans. However, technology in sustainable product, processes, and services is advancing rapidly and many companies find it difficult to meet their sustainability targets by doing high investment in technology resources. Therefore, to leverage sustainability solutions and align them with revenue and value streams, innovation are focused on intermediate technology, which is homegrown at relatively low cost to commercial technologies. In addition, sustainable business models are encouraged to work with local innovation firms that are cost-effective and hold utilitarian values considering the stakeholder value, social needs, and ethnocentricity (Rashid et al. 2013). The corporate goals toward sustainability need to be determined by ensuring broadly the global-local congruity and convergence of corporate objectives with the social and environmental requirements. Besides these factors, the concept of performance with purpose further strengthens the sustainable business models and its recurring innovations. Some multinational companies like PepsiCo have implemented the social responsibility with a deep sense of purpose to drive stakeholder value. This concept has emerged to create social values with focus on sustainability (Nooyi and Govindarajan 2020). PepsiCo has nurtured this concept by delivering following benefits:

22

RAJAGOPAL

• Superior financial returns (financial sustainability) • Transforming the product portfolio to social health concerns by reducing the sugar, salt, and fat, and introducing healthy and nutritious foods and beverages (human sustainability) • Conserving water and reducing carbon emission and plastic waste (environmental sustainability), and • Encouraging gender and family perspectives in employment within the company (social sustainability). The low energy consumption bulbs manufactured by leading electrodomestic companies like General Electric, and Philips have been successful in implementing sustainable business model in the businessto-consumer (domestic use) and business-to-business (commercial use) market segments. In addition, Walmart, an international retail giant introduced green supply chain efforts, which emphasizes selling low energy consumption electro-domestic products like led lights, television screens, laptops, and other consumer durable products. The retail giant’s powerful buyers, or merchants, now have a sustainability goal in their performance targets and reviews. Companies manufacturing construction material also show mega concern on business models leading to sustainability. The idea that organizations should send zero waste to landfill has grown out of niche as a global vision among the construction materials manufacturing companies. Over time, the waste management has turned as a management strategy to a source of profit. DuPont’s building innovation products business reduced its landfill waste from 81 million pounds to zero by 2012 and beyond (Winston 2012). The micro-level factors associated with the corporate process of building sustainable business models consist of following nature: • Value-chain creation and delivery, • Type of leadership in driving sustainable business projects, and • The nature and extent of partnerships in developing and implementing sustainability liked business models. There are various layers of social value creation. In the base layer, the value-chain model includes mainly informational-, emotional-, esteem-, and commitment factors, which positively influence the value creation process. The intermediate level of social value creation is developed by

1

SUSTAINABILITY IN BUSINESS

23

establishing relationships with stakeholders that enables sharing of information, co-creation, and coevolution process of social innovation and business projects. The apex level of social value creation has been identified as the sense of belongingness among stakeholders of sustainable business projects. In addition, collaborative projects promoting stakeholder engagements in managing sustainable projects, innovations, and technologies contribute to the social value creation (e.g., Liu et al. 2020). The value-chain management, and deliveries of sustainable business projects show effective results when organizations follow collaborative work culture with autonomy and employee engagement. The corporate social responsibility projects of most multinational companies are implemented as a pilot to test the sustainability-based business model. The macro and micro factors related to social needs, processes, and values significantly influence the business models driven by the sustainability objectives as exhibited in Fig. 1.2. Broad macro factors include ecology and environment, needs that are contextual to principal social sector (health, housing, agriculture, energy, natural resources, and local industries), and relevant public policies. The macro factors are affected by various micro elements in the implementation of sustainable business projects due to improper prioritization across the geo-demographic segment, which represent misleading social values and lifestyle. In a broad context, the social entrepreneurship tends to co-create social innovations while implementing the sustainability projects in the region and coevolve with the collaborating organizations. Collective intelligence (crowdsourcing) helps to enhance the ideation process on socially sustainable business projects and leads to frugal or low-cost innovations. Frugal innovation is often associated with sustainability (ecological and social) as it is developed with an objective to minimizing the use of resources (raw material, production resources, energy, fuel, water, waste, financial resources) and maximize the output within the given space, time, and application limitations. Frugal innovations are affordable and easily accessible as compared to conventional innovations (Weyrauch and Herstatt 2016). In addition, the reverse innovation with the potential of commercialization in a local-global marketplace is identified through collective intelligence. Multinational companies are practicing reverse innovation as one of the best practices suggested by General Electric company, in which products are designed first for consumers in low-income countries and

24

RAJAGOPAL

then adapted into disruptive offerings for developed economies. Companies adapting to the reverse innovation practices tend to market products at low price as it requires low technical requirements. Such reverse innovation products are created for low-income markets but could have global appeal (Winter and Govindarajan 2015). General Electric developed an Electrocardiograph (GE Mac 400) machine and a portable ultrasound machine for the Indian and Chinese markets as a reverse innovation product, which have been very successful in these markets. Similarly, Gillette had developed the Guard razor for the Indian market, which led to good performance. Later on, General Electric and Gillette introduced these products to US consumers and other developed markets (Zhu et al. 2017). However, products of social, frugal, and reverse innovations face the challenges of cost, time, and risk. Such problems have motivated micro, small, and medium companies to explore strategic alignment with large companies or sponsors. Cost and marketability are the two factors that drive the strategy of reverse innovation. Large companies, thus, roll over to the local markets to identify the customer-centric innovations developed by the local enterprises and tend to evaluate the economics of their business projects. When a company with the capability of sponsoring the reverse innovation investigates a new product opportunity, it not only defines the problem to which an innovation serves as a solution, but also lists the requirements that are needed for commercializing the innovation (Rajagopal 2016). The reverse innovation helps companies penetrate in the entering emerging markets or aim to realize opportunities to create high-performance, high-value products, and service at low cost and affordable prices that appeal to consumers with low per capita income. Delivering solutions of adequate quality at a competitive price for the masses is the primary challenge in developing innovations for emerging markets and catering to the customers therein is. Most international companies are getting engaged in managing reverse innovation for global markets, in which products are designed first for consumers in low-income countries and then adapted into disruptive offerings for developed economies. But only a handful of companies have managed to do it successfully until now. International companies usually create products by following time-tested methods, struggle to overcome the constraints, and leverage the benefits of emerging markets. They tend to develop reverse innovations and create scope for penetrating into the low-income markets that could have global appeal by matching market segments to existing products, lowering price by removing features,

1

SUSTAINABILITY IN BUSINESS

25

redesigning technical specification of generic products and upholding stakeholder value. Disruptive innovation is linked to reverse innovation that drives the firms back to the consumers’ buying behavior in reference to 4As paradigm comprising awareness, acceptability, adaptability, and affordability. Reverse innovation refers to developing ideas in emerging markets and persuading them in the existing markets, which drives tough challenges. Such innovation requires a company to overcome the institutionalized thinking that guides its actions and acquires ideas through the social media. Firms following reverse innovation develop a radically simpler and cheaper way of creating products in emerging markets and then position them in the desired consumer segments (Rajagopal 2014; Govindarajan 2012). Servitization is an emerging concept, which is associated with the innovation and social products. This concept suggests integration of product marketing and sales along with the relevant services associated to the product. Servitization concept encourages continuous services to support the product use and value-creation process, rather than selling a product with no services support from the manufacturer. Servitization has the following attributes: • Base services—Associated services with the products and its components, • Intermediates services—This is an extended services category that includes product repairs, maintenance, overhauls, helpdesks, training, condition monitoring, and • Augmented services—Provide intensive (repeat services, feedback, and improvements), extensive customer support arrangements, and outcome-based contracts (guarantee and warrantee execution). Rolls-Royce, which manufactures aircraft engines with a service package, can be cited as an appropriate example of servitization, whereby customers pay by the hour according to the amount of time an engine runs in flight. This is an unconventional drift from the traditional business models used by manufacturers, in which the manufacturer sells a product, then charges for repair work as often as it is needed. Rolls-Royce has integrated the services cost within the cost of product and offers life time service for the product. Caterpillar, a heavy earth moving and construction

26

RAJAGOPAL

machinery company, has emerged as a servitized manufacturing company which offers continuous services to its clients. The business model of the company is identical to the Rolls-Royce company. Similarly, Xerox, a photocopying and documents imagery company, has shifted its focus from manufacturing machines to servitization. Xerox has branched out to offer document publishing and production services, document management, and business process outsourcing. The companies illustrated above are actively engaged in development of sustainable business models and creating societal value chain. Servitization, therefore, can be understood as a process of transformation of a firm from following a product-centric to a service-centric approach (Raddats et al. 2019). In managing socially sustainable business projects, and stakeholdersand gender-empowerment help companies in delivering social products and services effectively and create consistent value. In addition, systems thinking in a firm engaged in developing sustainable business plans and its implementation, helps firms in making appropriate decision-making.

Corporate Social Responsibility Corporate social responsibility (CSR) is considered as voluntary corporate commitment toward social value creation through implementing business-related projects catering to the social, economic, and environmental needs. CSR has both explicit and implicit obligations that are self-designed by the companies to serve social causes, while CSR is also imposed on a company by the public policies to meet society’s expectations by elucidating corporate social behavior. CSR has emerged as a tool to promote beneficial social trends in order to meet the basic social needs of stakeholders. In most companies, the CSR activities are conducted to cover both the legal framework and social conventions. Globalization has raised the need to explore social connectivity with business to stay competitive in the market by developing the social value continuum. As different regions have different laws and standards, there are various ways to explore the social behavior and deliver social and environmental values through sustainable business models. However, CSR is not an altruistic contribution of a firm to the society, but it is more a way for mutual commitment of society and companies to prosper mutually. Therefore, CSR is conceived as a long-range plan of action in the context of building social value-chain and sustainability benefits (Falck and Heblich 2007).

1

SUSTAINABILITY IN BUSINESS

27

CSR is broadly aimed at serving the social needs at the bottom of the pyramid in various sectors like health, housing, agriculture, and nonfarm employment; and simultaneously getting the social leverage to expand business. A consistent flow of profits from social sustainability ventures like energy, textile, pharmaceutical, automobile and transport, and processed food companies could motivate future investments in socially beneficial projects. However, CSR projects face frequent shifts in the behavior of consumers, product manufacturing technologies and processes, and services delivery challenges in maintaining the consistency in social businesses. To overcome these challenges, companies need to develop perceptual map of consumers on specific products and services, and draw opportunity map that classifies opportunities along a spectrum from the least complex and resource-intensive points of views. In a pyramidal CSR based business opportunities paradigm, business opportunities in the mature markets stand at the top of the pyramid. Redesigning products to augment social values, and delivering products and services through extensive distribution channels constitute the middle part of the pyramid. At the bottom of the pyramid opportunities to grow green markets, develop sustainable business models, and create social value-chain, constitutes important CSR process (Simanis and Duke 2014). IKEA Group has evolved as the largest home furnishing company in the post twentieth-century business timeline, with nearly e50 billion from sales in the emerging markets by 2020. The company has adopted a new sustainability strategy that focuses the company’s efforts on its entire value chain from its raw materials sourcing to the lifestyle of its end consumers. IKEA People & Planet Positive strategy describes the sustainability agenda and ambition for everyone in the IKEA franchise system and value chain. It will stimulate action across IKEA in the coming years as the commitments of the company are set for 2030 in line with the global sustainable development goals. The company widely depends on the usage of forest wood as the principal raw material for manufacturing furnishings and home decor products. It has received wide criticism on deforestation to collect wood (Rangan et al. 2014). In response, the CSR of the company has been focused on developing and participating in various forestry projects with external organizations in order to contribute to the development of responsible forestry practices and policies. The

28

RAJAGOPAL

IKEA Group’s forestry projects aim at responsible management practices, building capacity for third party certification and combating illegal logging and forestry research and education. It is also necessary for companies to attend to the social and environmental concerns to grow environmentally sustainable alongside the market. Strategies on green marketing, corporate social responsibility, and developing citizen charter could help the company to serve the environmental issues effectively. Organizational sustainability also depends on the decision-making philosophy of the companies. Companies that are not autocratic in decision-making and follow bottom-up decision-making strategies by involving employees, market players, and stakeholders possess better chances of long-term sustainability in the marketplace (Rajagopal 2015). The overall knowledge developed through the real time prospects of the project deliverables in the market would help the project team to refine the budgetary provisions as well as allocate additional financial provisions for the post-project management of deliverables in the market. Systems perspective also guides the project team to develop a sustainable business model for commercializing the innovative products emerging as project deliverables. Each project has different orientation toward managing the project financials. Google, Johnson & Johnson and Ikea have adopted a single best suitable perspective for planning the sustainability projects through the corporate social responsibility projects. As marketing has evolved over time, the associated elements of marketing like consumer behavior, supply chain, business-to-business marketing, decision-making models, and business diplomacy and corporate social responsibility strategies have also grown over generations. Social values are built on the cultural dimensions and ethnicity. Egalitarianism and embeddedness of consumers in the society affect the business environment. Companies thus develop social welfare policies as corporate social responsibility, and build customer values. Moreover, social values affect the individual, ideological orientation on consumer attitudes toward industry, government policies, and consumer behavior (Arikan and Bloom 2014). Some companies that grow with social innovation objectives have a greater impact on social needs, stakeholder education, user value generation, and in developing the corporate social responsibilities. Social values embedded in business models demonstrate corporate reputation and financial success besides the customer loyalty.

1

SUSTAINABILITY IN BUSINESS

29

The social business models include sustainability strategy and leadership, mission, communication and learning, social care and work life, and loyalty and identification. Companies and stakeholders intending to proactively manage social sustainability need to undertake participatory projects with key partners and stakeholders on cultural change and development initiatives toward sustainability (Rajagopal 2019; Schönborn et al. 2019). Large companies act pro-social as a part of their corporate social responsibility activities. In India and China, large companies prefer office furnishings, such as floor carpeting, which is manufactured by the community industries (handloom or power-loom enterprises). Thus, the social influence also plays a significant role in buying attitudes of industrial clients.

References Arikan, G., & Bloom, P. B. (2014). Social Values and Cross-National Differences in Attitudes Towards Welfare. Political Studies, 63(2), 431–448. Bhattacharya, C. B., & Polman, P. (2016). Sustainability Lessons from the Front Lines. MIT Sloan Management Review, 58(2), 71–78. Bocken, N., Rana, P., & Short, S. W. (2015). Value Mapping for Sustainable Business Thinking. Journal of Industrial and Production Engineering, 32(1), 67–81. Bonini, S., & Gorner, S. (2011). The Business of Sustainability: A Survey. New York: McKinsey & Co. Boons, F., & Lüdeke-Freund, F. (2013). Business Models for Sustainable Innovation: State of the Art and Steps Towards a Research Agenda. Journal of Cleaner Production, 45(1), 9–19. Buttice, V., Colombo, M. G., & Wright, M. (2017). Serial Crowdfunding, Social Capital, and Project Success. Entrepreneurship Theory and Practice, 41(2), 183–207. Dionisio, M., & Raupp de Vargas, E. (2020). Corporate Social Innovation: A Systematic Literature Review. International Business Review, 29(2), 1–10. Evans, S., Vladimirova, D., Holgado, M., Van Fossen, K., Yang, M. Y., Silva, E. A., et al. (2017). Business Model Innovation for Sustainability: Towards a Unified Perspective for Creation of Sustainable Business Models. Business Strategy and Environment, 26(5), 597–608. Falck, O., & Heblich, S. (2007). Corporate Social Responsibility: Doing Well by Doing Good. Business Horizons, 50(3), 247–254. Furr, N. R., & Shipilov, A. (2018). Building the Right Ecosystem for Innovation. MIT Sloan Management Review, 59(4), 59–64.

30

RAJAGOPAL

Goni, F. A., Chofreh, A. G., Mukhtar, M., Sahran, S., Shukor, S. A., & Klemes, J. J. (2017). Strategic Alignment Between Sustainability and Information Systems: A Case Analysis in Malaysian Public Higher Education Institutions. Journal of Cleaner Production, 168(2), 263–270. Govindarajan, V. (2012). A Reverse Innovation Play-Book. Harvard Business Review, 90(4), 120–124. Graca, P., & Camarinha-Matos, L. M. (2017). Performance Indicators for Collaborative Business Ecosystems—Literature Review and Trends. Technological Forecasting and Social Change, 116(2), 237–255. Haanaes, K., Michael, D., Jurgens, J., & Rangan, S. (2013). Making Sustainability Profitable. Harvard Business Review, 91(3), 110–115. Habibi, M. R., Davidson, A., & Laroche, M. (2017). What Managers Should Know About the Sharing Economy. Business Horizon, 60(1), 112–113. Harreld, J. B., O’Reilly, C. A., III, & Tushman, M. L. (2007). Dynamic Capabilities at IBM: Driving Strategy into Action. California Management Review, 49(4), 21–43. Ikediashi, D. I., Ogunlana, S. O., Oladokun, M. G., & Adewuyi, T. (2020). Assessing the Level of Commitment and Barriers to Sustainable Facilities Management Practice: A Case of Nigeria. International Journal of Sustainable Built Environment, 1(2), 167–176. Kelly, E. (2015). Business Ecosystems Come of Age: The Business Trend Series. New York: Deloitte University Press. Liu, G., & Rong, K. (2015). The Nature of the Co-evolutionary Process: Complex Product Development in the Mobile Computing Industry’s Business Ecosystem. Group and Organization Management, 40(6), 809–842. Liu, S., Xiao, W., Fang, C., Zhang, X., & Lin, J. (2020). Social Support, Belongingness, and Value Co-creation Behaviors in Online Health Communities. Telematics and Informatics, 50, 101398. https://doi.org/10.1016/j. tele.2020.101398. Lubin, D. A., & Esty, D. C. (2010). The Sustainability Imperative. Harvard Business Review, 88(5), 42–50. Luzzini, D., Brandon-Jones, E., Brandon-Jones, A., & Spina, G. (2015). From Sustainability Commitment to Performance: The Role of Intra- and InterFirm Collaborative Capabilities in the Upstream Supply Chain. International Journal of Production Economics, 165(1), 51–63. Ma, L., Liu, Z., Huang, X., & Li, T. (2019). The Impact of Local Government Policy on Innovation Ecosystem in Knowledge Resource Scarce Region: Case Study of Changzhou, China. Science Technology & Society, 24(1), 29–52. Nidumolu, R., Prahalad, C. K., & Rangaswami, M. R. (2009). Why Sustainability Is Now the Key Driver of Innovation. Harvard Business Review, 87 (9), 56– 64.

1

SUSTAINABILITY IN BUSINESS

31

Nielsen, K. R. (2020). Policymakers’ Views on Sustainable End-User Innovation: Implications for Sustainable Innovation. Journal of Cleaner Production, 254, 120030. https://doi.org/10.1016/j.jclepro.2020.120030. Nooyi, I. K., & Govindarajan, V. (2020). Becoming a Better Corporate Citizen. HBR Web Article, Harvard Business School Press, March–April Issue. https://hbr.org/2020/03/becoming-a-better-corporate-citizen. Osterwalder, A., & Pigneur, Y. (2010). Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Hoboken, NJ: Wiley. Pal, R., & Gander, J. (2018). Modelling Environmental Value: An Examination of Sustainable Business Models Within the Fashion Industry. Journal of Cleaner Production, 184(2), 251–263. Raddats, C., Kowalkowski, C., Benedettini, O., Burton, J., & Gebauer, H. (2019). Servitization: A Contemporary Thematic Review of Four Major Research Streams. Industrial Marketing Management, 83(2), 207–223. Rajagopal. (2014). Architecting Enterprise: Managing Innovation, Technology, and Global Competitiveness. Basingstoke, UK: Palgrave Macmillan. Rajagopal. (2015). Butterfly Effect in Competitive Markets: Driving Small Change for Larger Differences. Basingstoke, UK: Palgrave Macmillan. Rajagopal. (2016). Innovative Business Projects: Breaking Complexities, Building Performance (Vol. 2)-Financials, New Insights, and Project Sustainability. New York: Business Expert Press. Rajagopal. (2019). Contemporary Marketing Strategy: Analyzing Consumer Behavior to Drive Managerial Decision Making. New York: Palgrave Macmillan. Rajagopal. (2020a). Transgenerational Marketing: Evolution, Expansion, and Experience. New York: Palgrave Macmillan. Rajagopal. (2020b). Barriers and Benefits Towards Sustainability Driven Business Models. In S. Hashmi & I. A. Choudhury (Eds.), Encyclopedia of Renewable and Sustainable Materials (Vol. 5, pp. 318–327). New York: Elsevier. Ramezani, J., & Camarinha-Matos, L. M. (2020). Approaches for Resilience and Antifragility in Collaborative Business Ecosystems. Technological Forecasting and Social Change, 151, 119846. Rangan, V. K., Toffel, M. W., Dessain, V., & Lenhardt, J. (2014). Sustainability at IKEA Group. Boston, MA: Harvard Business School Publication. Rashid, A., Asif, F. M. A., Krajnik, P., & Nicolescu, C. M. (2013). Resource Conservative Manufacturing: An Essential Change in Business and Technology Paradigm for Sustainable Manufacturing. Journal of Cleaner Production, 57 (2), 166–177. Sánchez, P., & Ricart, J. (2010). Business Model Innovation and Sources of Value Creation in Low-Income Markets. European Management Review, 7 (1), 138–154.

32

RAJAGOPAL

Schaltegger, S., Lüdeke-Freund, F., & Hansen, E. G. (2016). Business Models for Sustainability: A Co-evolutionary Analysis of Sustainable Entrepreneurship, Innovation, and Transformation. Organization and Environment, 29(3), 264– 289. Schönborn, G., Berlin, C., Pinzone, M., Hanisch, C., Georgoulias, K., & Lanz, M. (2019). Why Social Sustainability Counts: The Impact of Corporate Social Sustainability Culture on Financial Success. Sustainable Production and Consumption, 17, 1–10. Sheu, J. B., & Hu, T. L. (2009). Channel Power, Commitment and Performance Toward Sustainable Channel Relationship. Industrial Marketing Management, 38(1), 17–31. Simanis, E., & Duke, D. (2014). Profits at the Bottom of the Pyramid. Harvard Business Review, 92(10), 86–93. Stead, J. G., & Stead, W. E. (2013). The Coevolution of Sustainable Strategic Management in the Global Marketplace. Organization & Environment, 26(2), 162–183. Sun, J., Wu, S., & Yang, K. (2018). An Eco-systemic Framework for Business Sustainability. Business Horizons, 61(1), 59–72. Tate, W. L., Dooley, K. J., & Ellram, L. M. (2011). Transaction Cost and Institutional Drivers of Supplier Adoption of Environmental Practices. Journal of Business Logistics, 32(1), 6–16. Teece, D. J. (2010). Business Models, Business Strategy and Innovation. Long Range Planning, 43(1), 172–194. Teece, D. J. (2018). Business Models and Dynamic Capabilities. Long Range Planning, 51(1), 40–49. Velter, M. G. E., Bitzer, V., Bocken, N. M. P., & Kemp, R. (2020). Sustainable Business Model Innovation: The Role of Boundary Work for Multistakeholder Alignment. Journal of Cleaner Production, 247, 119497. https:// doi.org/10.1016/j.jclepro.2019.119497. Weyrauch, T., & Herstatt, C. (2016). What Is Frugal Innovation? Three Defining Criteria. Journal of Frugal Innovation, 2(1), 1–17. Williams, A., Seidel, V. P., & Woolley, A. (2020). Make Your Crowd Smart. MIT Sloan Management Review, 61(2), 1–6. Winston, A. (2012, December 18). Top 10 Sustainable Business Stories of 2012. HBR Web Article, Harvard Business School Press. https://hbr.org/2012/ 12/top-10-sustainable-business-st. Winter, A., & Govindarajan, V. (2015). Engineering Reverse Innovations. Harvard Business Review, 93(7), 80–89. Woodside, A. G., Sood, S., & Miller, K. E. (2008). When Consumers and Brands Talk: Storytelling Theory and Research in Psychology and Marketing. Psychology & Marketing, 25(2), 97–145.

1

SUSTAINABILITY IN BUSINESS

33

Ylhäinen, I. (2017). Life-Cycle Effects in Small Business Finance. Journal of Banking & Finance, 77 (2), 176–196. Zhu, F., Zou, S., & Xu, H. (2017). Launching Reverse-Innovated Product from Emerging Markets to MNC’s Home Market: A Theoretical Framework for MNC’s Decisions. International Business Review, 26(1), 156–163.

CHAPTER 2

Circular Economy and Production Systems

In the evolving industrial era, society, corporations, and consumers are living in a linear economy. The single-use lifestyle has set the industrial manufacturing and marketing around the philosophy as take, make, and dispose products across all sectors. This refers to a unidirectional model of production as the linear economy is driving the mass production and mass consumption. Therefore, the socioeconomic system has turned unsustainable in most developing regions, and the shift toward circular economy is becoming inevitable. This chapter discusses the concept and philosophy of circular economy and its applications in business and sustainability. The micro and macro indicators that determine the process and leverage of circular economy in managing cleaner businesses have been discussed in this chapter. The chapter also discusses eco-innovations and public–private governance in planning and implementation of circular economy. Circular economy (CE) and sustainability are coevolving concepts, which aims at minimizing the waste in manufacturing and operations in business process, exploring recycling opportunities, and co-creating social value chain by achieving sustainability goals. The concept of circular economy emphasizes not only the scope of austerity and recycling in manufacturing processes, as lean management aspires to do, but also systematically maintains the life cycles and next generation use values of products and their components. Indeed, long-standing components and prolonged product cycles have exhibited optimistic scenarios of use and reuse, which influence continuous improvements in the product design, © The Author(s) 2021 Rajagopal, Sustainable Businesses in Developing Economies, https://doi.org/10.1007/978-3-030-51681-9_2

35

36

RAJAGOPAL

help define the concept of a circular economy, and distinguish it from the linear take, make, and dispose (TMD) economic philosophy. In a circular economy, the goal for durable components, such as metals and most plastics, is to reuse or upgrade them for other productive applications through as many cycles as possible. This approach is contradictory to the linear mindset embedded in most of today’s industrial operations. The first order manufacturing companies prefer not to invest in recycling of industrial waste because it is considered a low-profile, tertiary manufacturing process with low scope of marketing. Their management philosophy of value chain, supply chain, and end-user experience expresses a linear TMD view rather than a sustainability-based delivery path as 3Rs comprising recycle, reuse, and revalue concepts.

Circular Economy: Concept and Applications Conceptually, circular economy is aimed at reducing industrial waste and moving toward sustainability-linked business modeling. The industrial outcomes of CE affect the social and market culture involving the stakeholders and consumers. Consumers play an important role in the circular economy and develop hierarchical consumption behavior by prioritizing the derived use values from CE business models in comparison to the conventional products and services. CE is backed by the extensive diffusion of knowledge among industries, market players, stakeholder, and customers. Consequently, customers develop consumption priorities through self-reference and analyzing the collective intelligence about the effects of products and services developed under the CE business model. Customers evaluate the rationale of purchase of single-use and unnecessary products against prolonging the lifetime of products through maintenance and repair activities. CE business model consumption philosophy requires allowing products to recirculate and provides the scope of sharing, leasing, and buying second-hand or recycled products as compared to the new ones (Maitre-Ekern and Dalhammar 2019). However, changing the consumption patterns is a complex process as it is widely determined by the consumption value-chain and competitive value matrix with the socioeconomic and cultural paradigms. Circular economy revolves around 4C factors comprising cost, cyclicality, competition, and consumption. A number of business opportunities and challenges of initiating and managing circular models have been experimented at various levels of industries. Such opportunities are visible

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

37

as remanufacturing and asset reuse with focus on developing secondgeneration products with acceptable use values, at lower cost, for the consumers of relatively lower strata. Accordingly, companies engaged in practicing CE tend to develop optimal pricing strategies, brand extensions, and taxonomy of geo-demographic segmentation for consumers to match the second-generation products with their self-image congruence. In the process, cannibalization issues, feedstock challenges, consumer acceptance, and reverse supply chain design appears to be the head-on challenges for the companies. Marketing designer products from the granulated plastic waste in the premium consumer segment has an embedded issue of perceived values because they are recycled products. If such cognitive stigma of consumers can be replaced by the knowledge on sustainability and conscious consumption, products with CE philosophy can be positioned in the upstream markets. However, challenges in CE is largely viewed in making decision on resources and product cyclicality as how often to remanufacture by infusing high rate of innovation and short usage cycles (Wagner 2017). The radical concepts of circular economy emphasize that it is restorative by design through using and reusing natural capital as efficiently as possible, and exploring value until the end of the lifecycle of finished products. In this context, following principles govern the circular economy: • Preserve and enhance natural recourse by controlling finite stocks, • Balancing the flow of renewable resources, • Optimize resource yields by recycling products, components, and materials, • Determine the prolonged use values of recycled products, • Make the system more effective by eliminating negative externalities, and • Create sustainable and consumer conscious consumption. Some designer CE products like wall hangings and furnishings made from textile cut-wastes, home decors made from granulated plastic-waste, and statues made from metal scrap emerge as the end-cycle products and have long shelf-life. Perceived values on goods and services in social circles and consumer communities are used as sensitive tools to adapt to the new technologies and socioeconomic concepts like CE. Therefore, marketing strategies for recycled products pose greater challenge to

38

RAJAGOPAL

develop consumer trust on the recycled products than the conventional models. Consequently, influencing both marketers and consumers to market recycled sustainable products is an up-hill task for most companies. Society can reinforce opinion on the use of recycled products to individual consumers and community for developing sustainable consumption attitude. The CE business model often faces challenge in controlling quality perspectives and convincing consumers on the prescribed values of recycled products. Quality of brands can be assumed from an analysis of the second-hand market for such brands. So, quality brands will also have a greater value in the pre-owned market (Giannias 1999). Nonetheless, there is clearly a group of consumers that favors second-hand or reused goods based upon their environmental concerns. The success of CE conceptualization and application depends on the circular design thinking, which enables firms to connect all points on the business canvas and develop convergence with the manufacturing process and marketing. Circular design thinking is a continuous process, which connects society and business with learning on 3-R factors comprising acquiring knowledge on resources, recycling technology, and reusability of products from consumers’ perspectives. Most companies engaged in CE applications remain as learning organizations and invest in collective intelligence, prototyping, and feedback loops. The concept of circular economy has two design thinking frames, which include opportunities for innovation and entrepreneurship, and consumerism practices. The low-cost and high-use value CE designs attract consumers and enhance the marketability of recycled products. The CE designs should aim at transforming the existing linear market and fragmented productionconsumption systems to resources renewability and closed loop consumption practices until the end-of-life product stages. Such design thinking will build a paradigm shift in the business ecosystem adapting to the CE philosophy (Kirchherr et al. 2017). The success of CE practices depends on the extent of engagement of customers, stakeholders, and market players. Therefore, understanding customer needs during the design thinking process adds values to circular business propositions. Companies engaged in designing recycled product consider the lifecycle of the product and its consumption values spread across the stages of product lifecycle. Such design will help end-users, suppliers, manufacturers, and retailers, who would be interested in using the recycled products. In the circular economy, companies design products not only for a customer or user, but also to deliver extended social

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

39

value-chain. Companies consider various factors in business modeling under CE environment, which are explained in Fig. 2.1. Developing strategic business models in CE environment has been a major challenge for many companies as it is complex and often has a prolonged break-even. Most micro, small, and medium enterprises are engaged in recycling the industrial waste that operate with CE business model. These firms operate in niche markets or serve as feeder companies to large recycling industries, which cater to both business-to-business, and business-to-consumer market segments. The granulated plastic waste, saw dust- and husk-based industries, and metal scrap recycling companies can be the examples associated with the niche enterprises in establishing backward linkages. The attributes of CE based business modeling is exhibited in Fig. 2.1. The business model canvas has two facets- background and foreground, which have many elements from concept development to generation of revenue streams. The principal elements at the background of the canvas consists of concept development, design thinking, industry attractiveness, market research, cost-structure, and management of revenue streams. The foreground of the canvas has elements contextual to the operations of the business model. These elements include organizational design, key partners, key activities, key resources, marketing channels, sales, customer relations management, and value propositions of the business model in the context of CE concepts as illustrated in Fig. 2.1. The CE epoch is associated with open innovation and encourages crowdsourcing in developing circular business and recycling concepts, and setting up transforming ideas into the industrial, economic, and business frameworks. Accordingly, companies set goals, objectives, and CE mission complementing the global sustainability development goals. While developing sustainable product concepts, firms also conduct extensive research to understand consumer behavior, moderate values, and locate markets. Design thinking is central to innovations of sustainable products through cyclical generations in the CE environment, which emerges out of the clear identification of social needs and consumption patterns in the society. Accordingly, the design thinking process identifies the right innovation and technology to co-create the second-generation products from the industrial waste, maps product attractiveness, value spread, and determine its shelf-life and end of the cycle product state. Companies categorize CE product development projects and develop project charter by measuring the anticipated cost, time, and risk factors

Value Proposions Customer Society Corporate

Key Partners Stakeholders Consumers Suppliers Retailers Technocrats

Cost Structure Manufacturing Markeng Human Resources Financial Overheads CSR and Value Stream

Organizaonal Design Corporates Public-Private Social organizaons Internaonal

Concept Development Crowdsourcing Transforming ideas Seng goals Value moderaons Locang market Understanding consumers

Key Acvies Ideaon Innovaon Prototypes Manufacturing Markeng

Revenue Streams Direct Indirect Futurisc

Channels Convenonal Digital Community

Background

Foreground

Market Research SLEPT factors Compeve environment Exploring opportunies Market taxonomy Consumer behavior

Background

Sales Direct Channelized Community Government

Industry Aracveness New entrants Substuon effect Consumer atude Supplier negoaons Compeon within industry Transformaonal paradigm Adaptability and behavioral connuum

Key Resources Financial Human capital Government Crowdfunding Assets-fixed and variable

CRM Servizaon Soluons Awareness

Design Thinking Social needs Consumpon paern Product aracveness Innovaon and technology Lifecycle and value-spread Co-creaon and co-evoluon Project charter Cost-me-risk matrix

Fig. 2.1 Business modelling canvas in circular economy environment

Circular Economy Business Model Canvas

40 RAJAGOPAL

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

41

in an operations matrix. Industry attractiveness has always been a prerequisite for developing business model. The industry attractiveness comprising new entrants, growth of substitutes, bargaining power of consumers and suppliers, and competition within the industry dominate the concerns of companies on developing appropriate marketing strategy and customer value. In an industry with fast-growing competition, consumers face complexities in developing sustainable perceptions and attitude to inculcate behavior. Rapidly emerging new brands (CE led philosophy) from unfamiliar companies attract consumers with low prices. Although most consumers tend to experiment with low priced products and substitute the products that deliver satisfactory experience, they fail to develop sustainable perceptions and build attitude toward repeat buying. However, industry attractiveness describes competition among traditional pipeline brands, which succeeds by optimizing the activities in their value chains. In addition, as a globalization effect, the platform brands co-created together with the consumers and producers; such as Uber (transport service), Alibaba (e-commerce), and Airbnb (urban housing); are growing in the market by improving the consumer chain and delivering satisfaction (Van Alstyne et al. 2016). Substitute products in the market affect the industry potential adversely, and pose threat to the customer preferences. Bargaining power of buyers refers to the direct or indirect pressure tactics to force the industry to reduce prices or increase product features, in view to optimize the customer value. Buyers gain power when they have choices, and when their needs can be met by a substitute product or by the same product offered by another supplier (Rajagopal 2019). Market research also is one of the important factors to be considered in business modeling. Firms engaged in CE business modeling need to explore the market environment for recycled products by analyzing the political, economic, social, technological, and legal factors associated with manufacturing and marketing the predetermined products. Market research also guides the firms to choose the right market, existing or potential, to position its products. However, sometime companies invest in educating consumers on the sustainable products and services, that support CE business philosophy and attempt to create demand among consumers. Organic cosmetics, textile, and renewable energy products in emerging markets need substantial consumer education to motivate buying decisions. The cost-structure in the context of manufacturing, marketing, human resources, financial overheads, and corporate

42

RAJAGOPAL

social responsibility is a sensitive input in developing business models and projective the direct, indirect, and future revenue streams associated with the business models. Recycling and customization of products is the growing sustainable business trends for industrial companies. New technologies like additive manufacturing are enablers to advanced technology-based manufacturing and also for sustainable production. Companies offering production systems for these technologies are more and more required to embed dynamic cost and risk implications on the manufacturing and marketing process (Schröder et al. 2015). The foreground of business model canvas consists of organizational design, key partners, key activities, key resources, sales, channels, CRM, and the associated value propositions as illustrated in Fig. 2.1. The business models based on the CE environment are largely managed within the existing organizational design of the firm or through the public– private partnership design. However, international funding for CE based sustainable business models requires to route the funds through social or public organizational systems. All market players serve as key partners of the sustainable business projects and engage in ideation and innovation process. Among various types of resources, crowdfunding for sustainable projects has emerged as promising approach. In view of the above discussion, circular-economy business models can be categorized into the following segments: • The business models that foster reuse and extend service life through repair, remanufacture, upgrades and retrofits; and • The business models that recycle products into second-generation for cost-effective usage. Remanufacturing and repair of old goods, buildings and infrastructure has created skilled jobs in niche markets. The circular-economy concepts have been successfully applied on small scales since the 1990s in eco-industrial parks such as the Kalundborg Symbiosis in Denmark, and in companies like Xerox (selling modular goods as services), Caterpillar (remanufacturing used diesel engines) and local companies manufacturing modular furniture. Large industries transfer the knowledge on CE based sustainable production system to the small and medium enterprises (SMEs) as a process of corporate social responsibility through vocational training and linking SMEs as feeder organization to large companies. The SMEs

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

43

provide semi-processed raw material to the large industries as a broad, upstream industrial convergence process. Such movement has emerged in developing countries and big emerging markets like China, India, and Brazil where SMEs learn CE technical know-how to change the existing business models. Governments and regulators disseminate public policy leverages to the SMEs that successfully adapt to CE based sustainable business models. The benefit includes rebates in taxation and operational subsidies on manufacturing, logistics, and inventory management to promote a circular economy in industry. The manufacturing system in CE environment is restorative or regenerative by social forces, public policies, and design of business models. However, recovering the sustainable projects at the “end-of-life” lifecycle is complex and causes high cost. Firms tend to explore sustainable diversifications to overcome the resource constraints and economic growth at the decline stage of the business lifecycle. CE provides opportunities for diversified businesses and supports companies in creating value, generating revenue, reducing costs, being resilient, and creating legitimacy (Manninen et al. 2018). Creating a circular economy requires fundamental changes throughout the value chain; and actions are needed at all phases of the value chain and by all stakeholders. CE business models can be classified into the following categories (Bocken et al. 2016): • • • • • •

Short cycle, Long cycle, Cascading, Pure circles, Digitization, and Produce on demand in the context of environmental strategies including slowing, closing and narrowing resource loops.

The regenerative system comprises resource inputs, waste, emissions, and narrowing the material and energy loops, which can be achieved through long-lasting design, maintenance, repair, reuse, remanufacturing, refurbishing, and recycling (Geissdoerfer et al. 2017). In addition to increasing the efficiency of resource use, CE based business models practice a better balance between cross-functional processes, economy, and the environment and society.

44

RAJAGOPAL

Sustainability and Innovations Sustainability is not always about the environment; it is also a capacity of ecosystems, which leads to social and personal well-being. Consequently, sustainability and eco-innovations have become the commercial strategy toward achieving competitive advantage. Among other businessto-consumer companies, Wal-Mart has demonstrated efforts to reduce packaging waste, and Nike, has removed toxic chemicals from its shoes (Unruh 2008). Sustainability and eco-innovations coevolve in the society, which are acquired by the industries over time upon their performance within niche. The ideation process for sustainable innovations are widely crowdsourced, co-created, and tested within the consumer community. Such innovation is need-based, frugal, and less ambidextrous due to the risk of unfamiliar brands and limited use values. Sustainable innovations are better known by their experiments such as Kuppam experiment of collective farming in India; Mississippi experiment of artificial pine generation; and Green Living Projects on architecture, energy, and water efficiency in Spain. Governments, social organizations, and companies are actively encouraging the sustainable innovations. Public policies reinforce the accountability of companies for their eco-innovation initiatives and social consequences of their actions. Therefore, corporate social responsibility (CSR) has emerged co-created and coevolved projects to explore social priorities and implement CSR projects through the participation of business managers, social leaders, stakeholders, and government representatives. Political and social pressure is built on companies to design and deliver social responsibility contextual to social needs, development, and consumption patterns. Sustainable innovation is usually grown in generic ways instead of adapting to the tested corporate strategies. However, the mismatch of social needs and development goals corner the public approaches to CSR and remains disconnected from the companies. The Whole Foods Market, Toyota, and Volvo have invested enormously in the CSR projects to drive social innovations and gain competitive advantage. Some companies, which develop casual relations with the society to explore social needs and deliver social or eco-innovations, treat corporate growth and social welfare as a zero-sum game. CSR goals addressing social and eco-innovations projects are combined with the public relations campaign by most companies as they are increasingly important to competitive success (Porter and Kramer 2006).

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

45

Most manufacturing companies design recovery value into their products at the outset. For example, the synthetic fiber manufacturing companies recycle nylon (Polyamide) fiber from polyester waste. A large part of the recycled nylon is manufactured from old fishing nets. This is a sustainable solution to divert garbage from the ocean to manufacture nylon carpets, and tiles. In the recent trend, the sustainable industries include biosphere-based industries. The biosphere accounts for a global ecosystem composed of living organisms (biota) and the abiotic (nonliving) factors from which they derive energy and nutrients. For example, the BioSphere Plastic LLC company at Portland, OR (USA) in one of the companies with sustainable business-to-consumer and business-to-business products, engaged in manufacturing biodegradable plastic. It is a unique additive package that, when placed into polymers, rapidly enhances the ability for plastic to biodegrade in anaerobic and aerobic environments. Plastic when placed into active microbial environments begin to decompose at very slow rates by microorganisms. Companies can learn from the biosphere rules to build eco-friendly products that involve cost-effective manufacturing and deliver high value to consumers (Unruh 2008). Most sustainable manufacturing start with a small group of key organizations, bring in project management expertise, link self-interest to shared interest, encourage productive competition, create quick wins, and, above all, build and maintain trust (Nidumolu et al. 2014). It is necessary for the companies to build appropriate innovation ecosystems to carry out the innovation business projects successfully. Leveraging tasks within the predetermined innovation ecosystem reduces various risks related to the manufacturing, project process, and commercialization. Random innovations are characterized by the fundamental types of risk that encompass innovation initiative risks, which are the familiar uncertainties of managing a project; interdependence risks comprising uncertainties of coordinating with alliance or outsourced innovators or start-up enterprises; and integration risks causing the uncertainties occurring during the adoption process across the innovation value chain. Firms that work within the innovation ecosystem and could assess risks holistically in an innovative business project and systematically establish realistic expectations, develop a more refined set of environmental contingencies, and arrive at a more robust innovation strategy could make the innovation successful (Adner 2006; Rajagopal 2016).

46

RAJAGOPAL

Most innovations grow in the emerging markets around the ethnic needs of consumers and are developed at low cost considering the affordability and adaptability potentials of the consumers in the home market. Often, such innovations developed for niche markets are commercialized by the large companies and are modified to fit into the extended geo-demographic market segments. Companies engaged in commercializing innovations, either acquired from start-up enterprises or co-created, invest enormous resources in exploring markets for launching innovations, carrying out diffusion of innovation, and creating unique values of innovation by exhibiting competitive differentiation and advantages to the consumers. Successful start-up enterprises in the emerging markets develop strategic partnership with the sponsors or large companies to launch and manage incremental innovations in the competitive marketplace. Such strategic partnerships serve the business-to-consumer and business-to-business market segments in the destination markets. Most consumer-led innovations have been carried out using the informational technology resources. The IT-based innovations are largely developed in emerging markets by the start-up enterprises and shared with the companies for improving their business performance. In addition to the above discussion, Fig. 2.2 illustrates the attributes of innovation ecosystems and factors affecting sustainability. Innovation ecosystem and sustainability are interrelated operational effects. They have convergent attributes that derive divergent effects on social values, well-being, and managing resources of commons . Drivers of sustainability are influenced by the emerging concepts of circular economy, and public policies as exhibited in Fig. 2.2. Sustainability ecosystem consists of causes and effects, new concepts, and strategies concerning conservation of natural resources, shared values, knowledge management, and stakeholder engagement. As discussed in the pretext, circular economy is embedded with sustainability comprising the emerging practices of recycling and value creation through product residuals, packaging throwaways, and industrial waste. Broadly, public policies in both developed and developing countries support the sustainability and circular economy-based business models anchored by the business companies. The public policies on innovation and sustainability are founded in the context of SDGs related development programs, state and international finding, and public–private partnership. Public policies also ensure that the sustainability and eco-innovation programs implemented by the

Circular Economy Industrial waste Packaging throwaways Product residuals Recycling and value creaon Extending generaons and lifecycles

Social values and wellbeing Economics and environment Social project management Sectoral development Stakeholder engagement Social needs Social Drivers

Public Policy SDGs and strategies Government programs Funding and subsidies Internaonal support Public-Private Partnerships Governance and monitoring Evaluaon and feedback

Social consciousness, Polical ideology, Global-local convergence, Sustainability, and Consumpon paern,

Social innovaon and design Strategic green focus Technology and lifecycle Business Canvas Data and Collecve intelligence Business modelling

Innovaon Ecosystem and Sustainability Economic viability and feasibility Consumpon behavior Culture and ethnicity Market ambidexterity Taxonomy of innovaon Design thinking Technology and Market

Sustainability Natural resources Conservaon Shared values Knowledge diffusion Stakeholder engagement

Fig. 2.2 Attributes of innovation ecosystems and sustainability

Solid waste Manufacturing Maintenance Co-evolving projects Value co-creaon Dump Management

People’s parcipaon Servizaon Biodegradability Leadership Polical ideology Internaonal diplomacy

2 CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

47

48

RAJAGOPAL

government, nongovernmental organizations, and by the companies as CSR, are properly monitored and improved continuously. Social drivers, business modeling, and growth in technology and markets (consumers and industrial) also are associated with the innovation ecosystem and sustainability as exhibited in Fig. 2.2. The social drivers that influence innovation and sustainability in the context of social projects or CSR include, social needs, sectoral development, social well-being and values, and economy. These attributes are spread across various innovation and sustainability projects across sectoral development and engage stakeholders in the designing and implementation of these projects. Business modeling is a structured process, which focuses on innovation and sustainability-led social and economic project, uses crowdsourcing (collective intelligence) for ideation process, and develops business models considering all the factors discussed in the canvas as presented in Fig. 2.1. Consequently, the business models focus on green design, innovation, and strategies using the contemporary technology and mapping its lifecycle. Finally, the technology and market-related factors that drive innovation ecosystem and sustainability consist of design thinking, type of innovation, ambidexterity of commercializing innovation, and attributes of consumption behavior. Choice of technology in business models are subjected to the analysis of economic viability (cost, time, risk, and use value) and feasibility (applied attributes, technology lifecycle, and functional complementarity). Furthermore, the availability of solid and liquid waste for recycling (including dump management), manufacturing and maintenance processes, opportunities of coevolution of sustainability projects, and co-creating values also contribute to the domains of technology and market, business modeling, and social drivers. One of the major challenges in the conventional social and cultural environment is the empowerment of entrepreneurs that builds confidence among the innovators to inculcate pro-innovation cognitive drive. Entrepreneurs need to scrutinize enormous personal and professional information of the interested people to induct into the innovation project and constitute appropriate teams. Besides driving the innovation project through the challenges of managing the resources efficiently, handling operational risk, marketability, and cost and time overrun, entrepreneurs often face market failures and piling-up of sunk cost due to radical and experimental innovation approach. Such endeavors cause risk roll-outs though out the project leading to abort the innovation untimely, which develops serious cognitive dissonances among entrepreneurs (Rajagopal 2016).

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

49

Macro- and Micro-Business Economy Factors Sustainability and innovation are widely affected by the macro factors comprising public policy, investment attractiveness, cooperation among stakeholders, consumers, state, and companies, market environment. Public policies in developing countries support sustainability projects through funding, accessibility and adaptability to technology, and initial marketing. Public policies encourage co-creation of innovation, public– private partnership in management of sustainability projects. These policies focus on improving the sociocultural conditions of social and higher economic gains in managing social innovation and sustainability projects. Such public polices emphasize cooperation strategies, and encourage social and business organizations to explore different types of alliances that combine productivity, spontaneity, and tangible outcomes in the context of managing sustainability projects, eco-innovations, management, and marketing. In this process, relationships among the society, entrepreneurs, and companies contribute significantly in promoting cooperation networks, which are characterized as an attractive strategy leading to better performance (Lin and Jin 2016). Most companies adopt cooperative perspectives and coevolved actions in design and management processes of sustainability projects. Such cooperative projects achieve tangible outcomes, create values, and stay successful to face the challenges ahead. For example, Council for Advancement of Peoples’ Action and Rural Technology (CAPART) is an autonomous federal government organization, which reviews the social and sustainable development proposals submitted by nongovernmental organizations (NGOs) and self-help groups, and decides whether to fund or lend financial or technological support. Over the years, CAPART has evolved into a networking hub for NGOs by promoting the exchange of ideas and exploring collaborations on delivering appropriate technology for social development and sustainability projects. CAPART has also teamed up with the Confederation of Indian Industries (CII) to tap into the Corporate Social Responsibility (CSR) programs of its member industries and The Energy and Resources Institute (TERI) to align its activities with the government’s concerns against climate change and sustainability.

50

RAJAGOPAL

Macro-economic Factors The new commercial reality in the global marketplace today, is the rapid shifts in consumer behavior due to the emergence of dynamic disruption of innovation and technology in consumer products on a previously unimagined scale of magnitude. Digital communication technology has driven the world toward a converging openness, transparency, and commonality. Consumer-centric companies have moved from emphasis on standardization to customization by reorienting marketing strategies on hedonic, functional, reliable, and utilitarian values, and low prices. They benefit from enormous economies of scale in production, distribution, marketing, and management. Some studies reveal that the convergence of globalization and financial development improve the economic performance in general but are often inimical to the sustainability, social development, and eco-innovation. Nonetheless, globalization, economic growth and increased energy consumption contribute directly to environmental degradation in the short term, while the financial sector has shown significant impact on environmental sustainability as it is supported by the public policy through refinancing, subsidies, or grants. Economic growth and proactive public policies tend to encourage the adaptation of greener and cleaner technologies in environmentally sustainable areas, which necessitates building proactive institutions and developing cooperation. The quality requirements in sustainable and eco-innovation projects encompass rigorous environmental standards, legal systems, property rights, eliminating socioeconomic and political corruption, stakeholder education, removing cultural barriers, and improving the quality of financial information. In addition, the provision of incentives and subsidies to manufacturing firms undertaking technological innovations need to be clearly drafted and implemented to help social and business organizations to comply with the environmental standards (Sethi et al. 2020). Arguing against the relationship between globalization and sustainability effects, it can be stated that globalization is a concept that represents a set of economic, political, and cultural processes manifested in an increased interdependence among resources (capital and human resources) and technology across countries. Such integration invariably raises macroeconomic benefits like overall revenues, GDP, investments, and employment, but it also jeopardizes ecology and environment protection with increased industrialization, energy consumption, and transportation. Such economic development conflict often throws enormous

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

51

challenges toward planning and implementing adequate public policies for environmental sustainability (Hoekstra and Wiedmann 2014). Trade liberalization has made a major impact on transforming the regional markets in setting new vogue, cultural values, and social validity for multidimensional growth of companies. However-, disruptive market trends have appeared to be a strong catalytic element in drifting the consumer behavior and generating scope for experiential marketing. The multidimensional growth converging business-to-business, business-toconsumers, and consumer-to-consumer business models has been the most successful design of the marketing organizations of the twenty-first century. However, some firms in a niche have evolved organizational designs that signal a new way of resolving the market competition (Rajagopal 2019). Opportunities for sustainable businesses to become global are expanding as the increasing market competition is introducing radical shifts in product design, attributes, use value, and value for money perception among consumers. The fast-growing product markets have prompted for continuous innovation, research and development, and for widening the impact of emerging trends in consumer products, by using effectively the digital space and consumer cognition dyadic model. The success of digitally seeding companies such as Airbnb Inc. and Uber Technologies Inc. is stimulating the imaginations of new businesses, while they are also susceptible to INVUCA risks in the business. INVUCA constitutes investment risks, new products and services management, market vulnerability, behavioral uncertainties of consumers, decision complexities, and ambiguity in marketing strategies. Although the digital marketing strategies can enable such ventures, the managerial approach taken toward business is the real differentiator (Rajagopal 2019). One of the principal macroeconomic factors is resources and investment planning, which not only ensures funding possibilities of sustainability projects, but also aims at reducing the costs of acquiring information, enforcing contracts, manufacturing, and making transactions. While a well-developed financial system attracts foreign direct investment on sustainability projects and augments growth, there is ambiguity regarding the effects of financial development on environmental quality (Ang 2008). Companies have adapted to globalization with a mindset of exploring opportunities to sell their products and services in the global markets using the bilateral and regional trade agreements. However, most companies build their businesses by harnessing the best markets

52

RAJAGOPAL

and consumer segments across the geo-demographic territories with a sharp external focus. The rapidly growing technology-based companies harness the resources and ideas by crowdsourcing and analyzing industry attractiveness to achieve a large global footprint quickly. Moreover, the operational complexity in the contemporary business environment lies toward considering the trade-offs between the benefits and costs among the managers to find the optimal global footprint for their organization (Kerr 2016). The macroeconomic policy refers to the top-down strategy developed and implemented in a country by the government and central banks, usually intended to maximize growth while keeping down inflation and unemployment. Countries with free-market policies, in particular free trade and the maintenance of secure property rights, typically have higher growth rates. The population, spending capacity of consumers, consumption pattern, and the market completion also contributes to the macroeconomic environment. (Rajagopal 2016). The macroeconomics factors include political concerns on monetary and fiscal policies, social and consumption systems, degree of trade openness, domestic and international product markets, labor markets, and the capital markets. Monetary and fiscal policies provide a coherent framework to analyze both the supply and demand sides of the economy, and enable companies to understand the interactions between economies and growth models in a region or country (Hope and Soskice 2016). Decision Dynamics Large companies follow resource-based business model in the social and environmental development sectors, which are based on exploitation of natural resources such as agriculture, water harvesting, and energy production. These resources are regulated by the state authorities; however, some resources of commons that are used in collective production (agriculture, water management, and community housing) are controlled by the social organizations. However, one of the criticisms of traditional economy-based business models is the exclusive focus on resource allocation, ignoring societal well-being and the impact of revenue generating projects on biological ecosystems. The instable rate of consumption of natural resources needs to be controlled for prolonged conservation of resources for continuous production activities. Therefore,

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

53

the development of new (economic) systems with an emphasis on sustainable practices, technologies, and processes has become necessary at the bottom-of-the-pyramid geo-demographic segments (Bocken et al. 2014). Multidimensional growth of marketing organization is best understood as the next step in the evolution from a resource-centric business model to a customer-centric knowledge-sharing model. It is a way of managing competitive markets that is particularly well adapted to stimulating the market leadership necessary to create economic value in complex markets (Strikwerda and Stoelhorst 2009; Rajagopal 2016). The continuum of market evolution across regions, products, and services has driven the rapid diffusion of new products in the marketplace. Quicker time to market, and shorter product life cycles are pushing companies to introduce new products more frequently in the global marketplace. While new products intend to offer high value, product introductions and transitions pose enormous challenges to managers. The macroeconomic policy refers to the top-down strategy developed and implemented in a country by the government and central banks, usually intended to maximize growth while keeping down inflation and unemployment. Countries with free-market policies, in particular free trade and the maintenance of secure property rights, typically have higher growth rates. The growing interest of companies in business models has been increasing with the success of CSR projects, tax incentives offered by the government, and opportunities of business expansion through social networks. Such focus of companies has led to the creation of stakeholder-based definitions, social conceptualizations, and technoeconomic perspectives of value creation through the CSR projects on sustainability. Social business models have emerged as planning tools for entrepreneurs that help them think through all the core components of their ventures and rationally employ the investment decisions in the context of technology, attracting venture capitalists, and developing strategic alliances with large companies on commercializing social innovation projects (Colombo et al. 2013). Some economists said this was the result of the birth of a new economy based on a revolution in productivity, rapid technological innovation (perhaps directly stemming from the spread of new technology), and increase in the value of human capital. Several developments in information technology and globalization leading to free trade through the regional trade agreements have evolved in developed countries since the mid-twentieth century. The new economy has shown a higher rate of productivity and growth

54

RAJAGOPAL

than the previous economy it replaced. The contemporary philosophy of development economics focuses on social and entrepreneurial production, employment, and income in order to equalize the gap between centralized and decentralized manufacturing and marketing systems. Sustainable entrepreneurship is, therefore, moved with the triple bottom-line by recognition, evaluation and exploitation of opportunities by stakeholders and entrepreneurs who create future products and services and deliver economic, social, and ecological gains (Patzelt and Shepherd 2011). Open economies have grown much faster on average than closed economies. The main instruments of macroeconomic policy include deviations in the interest rates, regulation of money supply, taxation policies, and public spending. It has been observed that growth rate of the economy declines and the GDP of the country falls when the rates of unemployment and inflation tend to rise. This may be an evidence of poor planning and implementation of macroeconomic policy. Higher public spending relative to GDP is generally associated with slower growth. The rise in the rate of inflation is contributed by high social expenditure and political instability in a country. The long-run pattern of growth and recession in the business that may be explained as boom and bust of the economy of a country or a region may be described as business cycle (Rajagopal 2016). Markets are evolving toward sustainable products in the mass-market. Sustainability has become critical to the shifts in consumption behavior in the society. Thus, consumer-centric companies need to consistently grow their businesses with the cooperation of society and stakeholders. Marketing managers focus on developing product designs and attributes that offer value to customers and satisfy social and cultural needs through providing cultural promotion, environmental protection, and relief activities. Sustainability encompasses economic, social, and environmental responsibilities of an organization, which invoke the question on their effective implementation. For example, the traditional sustainable activities of fashion industry like manufacturing of organic textiles and dresses have a positive effect on brand image, trust, and satisfaction of consumers. The sustainable brands have a positive influence on building brand loyalty (Jung et al. 2020). Though the process of market evolution is governed by various political, economic, social, technological, and legal factors; sales is considered to be a major indicator of market share and growth. However, sales might not be a right performance indicator, because selling focuses on the competencies of the seller, whereas marketing

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

55

strategies focus on the needs of the consumers. Business transformation in consumer-centric companies evolve over the years in reference to values-based governance. The necessity of creating hybrid business models infuses with local cultures and practices in global markets, leveraging strategic partnerships by encouraging co-creation with consumers (Gupta and Shapiro 2014). Globalization has triggered aggressive market competition, which has driven the shorter product life cycles of existing products, as new products are penetrating with higher speed in the markets due to technological development and scale of operations. In this process, many products are dropped off the product life cycle, either at the stage of introduction or growth. Few products sustain until the mature stage is passed. The growth of technology and its dynamic synchronization with the industry toward rapid introduction of new generation products is leading to quick adaptations of global products. The globalization of customer requirements is resulting from the identification of worldwide customer segments of homogeneous preferences across territorial boundaries. Business-toconsumers and Business-to-business markets are driven by the consumer demands, because they are perceived as more value oriented and of added benefits. The globally integrated strategies of business-to-consumer companies exhibit the current trends of consumer engagements and cocreation. Such firm-level model explains industry trends from economic perspectives, and the organizational theory is beginning to examine the organizing principles of multinational firms. However, there is a gap in explaining the strategic motivations of multinational firms as they expand and integrate worldwide (Tallman and Fladmoe-Lindquist 2002). In the customer-centric business models, firms often assure product quality and services, and tend to overcome the administrative complexities on cost control, environmental technologies, and chaotic social issues. Nevertheless, sustainability projects developed to serve as CSR of the company generally addresses issues concerning the use of fewer or unmanaged resources of commons to make products in compliance with environmental and social requirements. Consequently, sustainable practices adopted by the global customer-centric firms like Unilever, Procter and Gamble attempt to deliver environmental and social values through continuous improvements in the economic and utilitarian goals (Achabou and Dekhili 2013). Legal environment in business has a dyadic relationship with political and regulatory systems in a country. Accordingly, it is necessary for firms

56

RAJAGOPAL

to get acquainted with the domestic and international laws. Multinational enterprises are bound to experience business performance with diverse legal situations. The legal barriers in most countries include antidumping laws, tariff structures, horizontal price fixing among competitors, and price discrimination. The act of selling a product at a price lower than the cost of production is defined as dumping the product. Dumping is a pricing strategy for selling products in foreign markets below cost, or below the price charged to domestic customers. Such strategy is adopted to capture a market and to damage rival enterprises in a selected market. The legal definitions are more precise, but broadly, several international agreements allow governments to act against dumping, as dumping practices damage the competition in a marketplace. Circular Economy Perspectives The regulatory frameworks for sustainability, circular economy, and eco-innovations are discretionary for the countries, though most countries comply with the international philosophy on sustainable development goals. However, the role of state in efficiently implementing the ecosystem services has been criticized in various studies. Such loose-ends in legal frameworks create the impetus to reexamine the agency of the law and reevaluate whether and how the legal structures respond to efficient management of ecosystem services. Therefore, public law and policy need to be refocused on sustainability projects as an essential development activity and craft a legal infrastructure to prevent loss of vital ecosystem services (Abcede and Gera 2018). A new commercial reality in today’s global marketplace is the rapid shift in consumer behavior due to the emergence of dynamic disruption of innovation and technology in consumer products on a previously unimagined scale of magnitude. Environmental sustainability and consumption of green products has driven the world toward convergence of openness, transparency, and commonality. However, most consumer-centric companies have shifted their strategy-emphasis from sustainability to customization by reorienting marketing strategies on hedonic, functional, reliable, and utilitarian values; and low prices. The SDG-12 sets the global norms for sustainable consumption and production. This goal emphasizes on environmental sustainability to be encouraged in the agricultural and industries-based economies. The SDG-12 standards advocate reduction in global food waste, and sustainable and efficient harvesting of natural

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

57

resources (United Nations 2015). In addition, efficient waste recycling and its reuse programs, which are aligned with the circular economy, focus on improving production technologies and supply chains system in the developing economies. Integrating and coordinating sustainability information, and promoting sustainable procurement practice have been the real challenges to improve scientific and technical capabilities of social organizations and corporate bodies. Besides, the sustainability projects also focus on lowering the fossil fuel subsidies and restructuring carbon pricing models (Stahel 2016). Sustainability projects in alliance with the circular economy principles, benefit from enormous economies of scale in production, distribution, marketing, and management. The growing concept of circular economy has given further boost to companies to adapt to the public–private policies of marketing sustainability-driven products. The potential activities within the circular economy movement include improving performance and reducing costs associated with the recycled and sustainable products. These activities are largely focused on exploring and exploiting renewable energy, and solid and liquid waste, to regenerate products and services, and promote the sharing of products through maintenance and design. In addition, firms tend to improve product efficiency and removing waste from supply chains to optimize cost, benefits, and values with closed loops designs. The production loops have emerged as tangible output with most manufacturing companies like automobiles, textiles, energy, organic food products, and companies delivering goods and services virtually. Replacing old materials with advanced renewable ones, or applying new technologies such as 3-D printing, have emerged as exchange solutions as a part of circular economy. Most industries already have profitable opportunities in each area (Beve and Swartz 2016). Combining sustainable consumption with the circular economy concept the incidence of resource scarcity can be narrowed by reducing resource use and increasing cycling of products. To achieve sustainable consumption in a circular economy, production and consumption practices need to be shifted to sustainable measures. Business models can potentially influence both these practices as they define how a company conducts business and shapes the company–consumer relationship (Tunn et al. 2019). Exploring projects of high social values and sustainability is a big challenge for the companies, which are planning CSR project with multidimensional impact spanning across sectoral development (health, agriculture, industries, infrastructure, and resources exploitation), economic

58

RAJAGOPAL

benefits, and social values. Companies tend to explore projects in association with the government, social organizations, and the internal departments of the company. These organizations look for various ways to gain competitive leverage in the business with co-created innovative business models on sustainability, circular economy (CE), and ecological innovations. Trends such as circular economy, fair trade, lowsumerism1 , and sharing economy are some of the many emerging entrepreneurial approaches that support designing, implementation, and monitoring of environmental and social sustainability projects. In addition, cultural and socioeconomic macro-trends pose challenge to the conventional mass production paradigms. The CE based innovative business models focus on sustainability as a crucial design element (Todeschini et al. 2017). Opportunities for sustainability-linked businesses through global to local markets are expanding due to the increasing consumer awareness, which is introducing radical shifts in consumption pattern and value perceptions of environmentally sustainable products. The fast-growing markets for sustainable products today have expanded from food portfolios to natural pharmaceutical products, and organic cosmetics to organic clothing, due to the changing perceived value, sustainability commitment, uniqueness, acquisition from known sources, and lifestyle changes (Rajagopal 2020). Ecolabeling has emerged as a means of reducing the information gap between consumers and producers, and create confidence in buying socially sustainable products and services. The implication of ecolabeling has motivated the consumption behavior of green goods. The ecolabel helps product differentiation and gives reliable information to reduce informational asymmetries. Consumers with adequate awareness about the ecolabels feel more informed, and conscious consumers prefer subsidy on green goods instead of paying high price as these products are of sustainability value and are supported by the public policies (Schumacher 2010). Ecolabel criteria mainly focus on ecological considerations in production. The connection between ecolabels and clothing designers is expanding rapidly in the developed economies. Many companies look the ecolabeling schemes as the means to set performance criteria and demonstrate progress to customers (Clancy et al. 2015). 1 Lowsumerism is a voluntary social and consumers’ movement that grew in reaction to excessive consumption and unethical spending, which in turn advocates consumers to minimize consumption, optimize values and, orient buying behavior towards sustainable projects.

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

59

Micro Factors Consumers today buy solutions, not products. Therefore, consumercentric companies employ resources on consumer research to periodically understand and refresh the consumer needs and preferences. Accordingly, companies offer consumer-marketing solutions with competitive advantage to encourage acquisition and retention of profitable customers. Brand awareness, quality referrals, and sharing of brand experience reap enormous benefits to develop individual relationships with customers. To achieve these goals, companies must become aware of the different types of benefits they offer and convey their value to the appropriate executives in the customer company. Most consumer-centric companies tend to develop positive relationships among consumers to create sustainable buying behavior and perceived values. Conventionally, marketing strategy was centered as competition oriented to achieve superior customer-brand relationships and firm performance. Over time, changes in the business philosophy and global business environment have prompted some companies to consider sustainabilitycentered and stakeholder-focused approaches to marketing strategy development. As the global focus on sustainability and eco-innovations have increased and are supported by the public policies, the triadic market approaches comprising market-driven, sustainability-centered, and stakeholder-focused strategies have been categorically used by the companies in specific industries like fashion, consumer products, and social capital goods (health, energy and housing). The sustainability-based and stakeholder-based marketing strategies have been supported by the corporate social responsibility and societal ethics (Mena et al. 2019). Consumer-centric companies motivate consumers to use new products, perceive their use value, analyze value for money, develop consumption experience, and change their behavior. However, consumers often fail to develop sustainable consumption behavior as companies overpromise and under-deliver product values in the competitive marketplace. Value-based perception of consumers develops consumption attitude by evaluating value for money, competitive benefits, and utilitarian satisfaction. Often, a positive consumption experience guarantees satisfaction, and develops brand loyalty and sustainable behavior among consumers over time. Consumers active on social media also develop knowledge, perceptions, and motivations through the user-generated contents and

60

RAJAGOPAL

experience sharing. As social media is dynamic, it attributes to the variable consumer behavior (Rajagopal 2019). Conceptual learning addresses know-why attributes, and delivers a better understanding of cause-and-effect relationships through innovation experience and peer reviews. Operational benefit of an innovation leads to delivering a new or virgin concept to the consumers with substantial evidence of high satisfaction and returns on investment on the innovation. As the innovation begins to sprout at low-scale in the emerging markets with potential benefits across the larger markets, multinational companies tend to invest in research and development, and co-create skilled manpower at low cost (Rajagopal 2016). Though innovations are necessary for social and economic development, not all innovative products and services are often acceptable to the consumers and stakeholders. Since companies invest in the new product development projects and radical innovations, they succumb to the low response of consumers and market demand. Such innovations, despite substantial social benefits fail to perform in the markets. Consumers have adopted many sustainability- and technology-based innovations; however, personal value-oriented innovations such as genetically modified foods have faced high resistance from consumers and referrals. Within the retail foodscape, the technology-based innovations like ultra-high temperature milk, freeze-dried fruits and vegetables, and solar domestic appliances (portable solar cooking stoves) have received high levels of consumer acceptance (Vanhonacker et al. 2013). Social Capital and Values Social values are built on cultural dimensions and ethnicity. Egalitarianism and embeddedness of consumers in the society affect the business environment. Companies, thus, develop social welfare policies as corporate social responsibilities, and build consumer values. Moreover, social values affect the individual ideological orientation on consumer attitudes toward industry, government policies, and consumer behavior (Arikan and Bloom 2014). Technology shows significant positive impact on economic growth, while both human capital and technology are important determinants of growth in developing countries and emerging markets. Therefore, improvement of the educational sector, and more funding for research and development among developing countries are prominent considerations to monitor and measure business growth. Such

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

61

conditions encourage innovations needed to facilitate sustained economic growth (Adelakun 2011). Social value on sustainable projects are delivered by the nongovernmental organizations with varied performances in alliance with the companies. Most companies implement CSR projects in association with the informal social groups, knows as self-help groups (SHG). Women’s selfhelp groups in India provide an interesting and concrete example of an intervention that is well-aligned with theoretical ideas about development as a process of capability expansion. These groups contribute to the policy priorities of gender empowerment laid in the global sustainability development goals. The JEEVikA (livelihood) program in Bihar, India finds that economically and socially marginalized groups have been benefited from SHG membership through a reduction in reliance on high-cost sources of borrowing. These SHGs have helped to increase the participation of women in household decision-making and delivered positive impacts on human development in rural areas. Similarly, another SHG in Andhra Pradesh, a southern state in India, has evidenced impact on enhancing social capital as the organization has motivated program members on higher savings to move freely within their village and interact within their caste. Protein and energy intake, and consumption also increased among member of the group as income or asset changes. These groups establish sustainability in human development and rural wealth generation (Anand et al. 2019). Social capital, which is a valuable asset in improving the knowledge of stakeholders, positively affects their purchase intention toward organic foods and stimulates actual purchase behavior. Contemporary knowledge and experience sharing among women in interpersonal or digital platforms help in developing trust on the acquired knowledge. The social capital includes the following dimensions that help in promoting community participation and stakeholder engagement (Hung et al. 2013): • • • •

Interpersonal relationships, Functional support through social networks, Stakeholder engagement, and Trust and cooperation.

Trust significantly mediates relationships between available information, perceived knowledge, and organic purchase intentions. Attitudes toward

62

RAJAGOPAL

organic foods and subjective norms also significantly influence organic food choices among women consumers (Teng and Wang 2015). Social influence and perceived knowledge develop cognition in the form of beliefs, utilitarian attitudes, and behavior toward consumption of organic products. Women also feel hedonic pleasure in paying premium price for organic products to cater to health and family wellness needs (Lee and Goudeau 2014). The successful adaptation and creation of sustainable entrepreneurial ventures are significantly influenced by the interactions within social networks (tradition and digital), which augment the ability to create collective intelligence, and environmentally and socially integrated economic systems. Sustainable business models are largely driven by the social networks and stakeholders at the mature stage of businesses as they rely more on social patronage and values than corporate sponsorship. However, the development of sustainable business models is a complex process that requires a supportive entrepreneurial and social ecosystem (Neumeyer and Santos 2018). Social impact theory (SIT) also explains the contextual association of an individual’s decision-making within the social values and influence behavioral perspectives. Major behavioral theories, therefore, focus on proximal influences on behavior that are instrumental in developing cognitive attributes within the social context (Burke et al. 2009). Attributes of SIT delineate how emotions shift the focus of individual decision-making to the wider context of social relations and guide the subjectivity norms such as hedonism, anthropomorphism, and selfesteem among individuals (Powell and Gilbert 2008). Social interactions embedded in social commerce sites and media channels influence the purchase intention. Positive interpersonal communication and usergenerated contents on digital platforms significantly affect consumers’ intention to buy a product. Intention to purchase driven by social interaction facilitates the likelihood of actual buying and sharing information with peers (Wang and Yu 2017). Many companies diagnose social problems with an engineering mindset to build it the right way and make sure it works. During this process, often the social and cultural intentions are ignored, which result into delays in adaptation to the solutions. Ecoinnovations, on the other hand, approach problems with the question as are we integrating the social values in the prototype and building the right solution in the first place? Combining imagination, insights, and impact in providing a right ecological solution emerges as a major challenge to the companies.

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

63

References Abcede, R., & Gera, W. (2018). Examining the Coherence of Legal Frameworks for Ecosystem Services Toward Sustainable Mineral Development in the Association of Southeast Asian Nations. Ecosystem Services, 29(Part B), 228–239. Achabou, M. A., & Dekhili, S. (2013). Luxury and Sustainable Development: Is There a Match? Journal of Business Research, 66(10), 1896–1903. Adelakun, O. J. (2011). Human Capital Development and Economic Growth in Nigeria. European Journal of Business and Management, 3(9), 29–39. Adner, R. (2006). Match Your Innovation Strategy to Your Innovation Ecosystem. Harvard Business Review, 83(4), 98–116. Anand, P., Saxena, S., Gonzalez, R., & Dang, H. H. (2019). Can Women’s Self-help Groups Contribute to Sustainable Development? Evidence of Capability Changes from Northern India (Policy Research Working Paper #9011). Washington, DC: World Bank Group. Ang, J. B. (2008). Determinants of Foreign Direct Investment in Malaysia. Journal of Policy Modeling, 30(1), 185–189. Arikan, G., & Bloom, P. B. (2014). Social Values and Cross-National Differences in Attitudes Towards Welfare. Political Studies, 63(2), 431–448. Beve, A. T., & Swartz, S. (2016, November). Starting at the Source: Sustainability in Supply Chains. New York: McKinsey & Co. Bocken, N. M. P., de Pauw, I., Bakker, C., & van der Grinten, B. (2016). Product Design and Business Model Strategies for a Circular Economy. Journal of Industrial Production Engineering, 33(3), 308–320. Bocken, N. M. P., Short, S. W., Rana, P., & Evans, S. (2014). A Literature and Practice Review to Develop Sustainable Business Model Archetypes. Journal of Cleaner Production, 65(1), 42–56. Burke, N. J., Joseph, G., Pasick, R. J., & Barker, J. C. (2009). Theorizing Social Context: Rethinking Behavioral Theory. Health Education & Behavior, 36(5suppl.), 55S–70S. Clancy, G., Fröling, M., & Peters, G. (2015). Ecolabels as Drivers of Clothing Design. Journal of Cleaner Production, 99, 345–353. Colombo, M. G., Piva, E., & Rossi-Lamastra, C. (2013). Authorizing Employees to Collaborate with Communities During Working Hours: When Is It Valuable for Firms? Long Range Planning, 46(3), 236–257. Giannias, D. A. (1999). Microeconomic Analysis-Based Comparative Evaluation of Brands. The Journal of Product and Brand Management, 8(2), 119–129. Geissdoerfer, M., Savaget, P., Bocken, N. M. P., & Hultink, E. J. (2017). The Circular Economy-A New Sustainability Paradigm? Journal of Cleaner Production, 143, 757–768.

64

RAJAGOPAL

Gupta, S., & Shapiro, D. (2014). Building and Transforming an Emerging Market Global Enterprise: Lessons from the Infosys Journey. Business Horizons, 57 (2), 169–179. Hoekstra, A. Y., & Wiedmann, T. O. (2014). Humanity’s Unsustainable Environmental Footprint. Science, 344(6188), 1114–1117. Hope, D., & Soskice, D. (2016). Growth Models: Varieties of Capitalism, and Macroeconomics. Politics & Society, 44(2), 209–226. Hung, S. W., Lin, J. Z., & Chen, P. C. (2013). How Social Capital Influences Health Community Members’ Adoption of Organic Foods. British Food Journal, 115(11), 1564–1582. Jung, J., Kim, S. J., & Kim, K. H. (2020). Sustainable Marketing Activities of Traditional Fashion Market and Brand Loyalty. Journal of Business Research (in Press). https://doi.org/10.1016/j.jbusres.2020.04.019. Kerr, W. R. (2016). Harnessing the Best of Globalization. MIT Sloan Management Review, 58(1), 59–67. Kirchherr, J., Reike, D., & Hekkert, M. (2017). Conceptualizing the Circular Economy: An Analysis of 114 Definitions. Resource Conservation and Recycling, 127 (2017), 221–232. Lee, H. J., & Goudeau, C. (2014). Consumers’ Beliefs, Attitudes, and Loyalty in Purchasing Organic Foods: The Standard Learning Hierarchy Approach. British Food Journal, 116(6), 918–930. Lin, F. J., & Jin, Y. H. (2016). The Effect of Network Relationship on the Performance of SMEs. Journal of Business Research, 69, 1780–1784. Maitre-Ekern, E., & Dalhammar, C. (2019). Towards a Hierarchy of Consumption Behavior in the Circular Economy. Maastricht Journal of European and Comparative Law, 26(3), 394–420. Manninen, K., Koskela, S., Antikainen, R., Bocken, N., Dahlbo, H., & Aminoff, A. (2018). Do Circular Economy Business Models Capture Intended Environmental Value Propositions? Journal of Cleaner Production, 171, 413–422. Mena, J. A., Hult, G. T. M., Ferrell, O. C., & Zhang, Y. (2019). Competing Assessments of Market-Driven, Sustainability-Centered, and StakeholderFocused Approaches to the Customer-Brand Relationships and Performance. Journal of Business Research, 95(4), 531–543. Neumeyer, X., & Santos, S. C. (2018). Sustainable Business Models, Venture Typologies, and Entrepreneurial Ecosystems: A Social Network Perspective. Journal of Cleaner Production, 172, 4565–4579. Nidumolu, R., Ellison, J., Whalen, J., & Billman, E. (2014). The Collaboration Imperative. Harvard Business Review, 92(4), 76–84. Patzelt, H., & Shepherd, D. A. (2011). Recognizing Opportunities for Sustainable Development. Entrepreneurship Theory and Practice, 35(4), 631–652.

2

CIRCULAR ECONOMY AND PRODUCTION SYSTEMS

65

Porter, M. E., & Kramer, M. R. (2006). The Link Between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review, 84(12), 78–92. Powell, J. L., & Gilbert, T. (2008). Social Theory and Emotion: Sociological Excursions. International Journal of Sociology and Social Policy, 28(9–10), 394–407. Rajagopal. (2016). Innovative Business Projects: Breaking Complexities, Building Performance (Vol. 1)-Fundamentals and Project Environment. New York: Business Expert Press. Rajagopal. (2019). Contemporary Marketing Strategy: Analyzing Consumer Behavior to Drive Managerial Decision Making. New York: Palgrave Macmillan. Rajagopal. (2020). Barriers and Benefits Towards Sustainability Driven Business Models. In S. Hashmi & I. A. Choudhury (Ed.), Encyclopedia of Renewable and Sustainable Materials (pp. 318–327). Amsterdam: Elsevier. Schröder, A., Falk, B., & Schmitt, R. (2015). Evaluation of Cost Structures of Additive Manufacturing Processes Using a New Business Model. Procedia CIRP, 30, 311–316. Schumacher, I. (2010). Ecolabeling, Consumers’ Preferences and Taxation. Ecological Economics, 69(11), 2202–2212. Sethi, P., Chakrabarti, D., & Bhattacharjee, S. (2020). Globalization, Financial Development and Economic Growth: Perils on the Environmental Sustainability of an Emerging Economy. Journal of Policy Modeling (in Press). https://doi.org/10.1016/j.jpolmod.2020.01.007. Stahel, W. R. (2016). The Circular Economy. Nature, 531(7595), 435–438. Strikwerda, J., & Stoelhorst, J. W. (2009). The Emergence and Evolution of the Multidimensional Organizations. California Management Review, 51(4), 11–31. Tallman, S., & Fladmoe-Lindquist, K. (2002). Internationalization, Globalization, and Capability-Based Strategy. California Management Review, 45(1), 116–135. Teng, C. C., & Wang, Y. M. (2015). Decisional Factors Driving Organic Food Consumption: Generation of Consumer Purchase Intentions. British Food Journal, 117 (3), 1066–1081. Todeschini, B. V., Cortimiglia, M. N., Callegaro-de-Menezes, D., & Ghezzi, A. (2017). Innovative and Sustainable Business Models in the Fashion Industry: Entrepreneurial Drivers, Opportunities, and Challenges. Business Horizons, 60(6), 759–770. Tunn, V. S. C., Bocken, N. M. P., van den Hende, E. A., & Schoormans, J. P. L. (2019). Business Models for Sustainable Consumption in the Circular Economy: An Expert Study. Journal of Cleaner Production, 212, 324–333.

66

RAJAGOPAL

United Nation. (2015). Envision 2030 Goal 12: Responsible Consumption and Production Department of Economic and Social Affairs. New York: United Nations Secretariat. Available at https://www.un.org/development/desa/dis abilities/envision2030-goal12.html. Retrieved May 28, 2020. Unruh, G. C. (2008). The Biosphere Rules. Harvard Business Review, 86(2), 111–117. Van Alstyne, M. W., Parker, G., & Choudary, S. P. (2016). Pipelines, Platforms, and the New Rules of Strategy. Harvard Business Review, 94(4), 54–62. Vanhonacker, F., Kühne, B., Gellynck, X., Guerrero, L., Hersleth, M., & Verbeke, W. (2013). Innovations in Traditional Foods: Impact on Perceived Traditional Character and Consumer Acceptance. Food Research International, 54(2), 1828–1835. Wagner, T. P. (2017). Reducing Single-Use Plastic Shopping Bags in the USA. Waste Management, 70(1), 3–12. Wang, Y., & Yu, C. (2017). Social Interaction-Based Consumer Decision-Making Model in Social Commerce: The Role of Word of Mouth and Observational Learning. International Journal of Information Management, 37 (3), 179– 189.

CHAPTER 3

Green Consumerism

Companies that introduce sustainable offerings often face challenges in preparing consumers for buying green products. This chapter critically examines the corporate business policies on consumer education toward green consumerism. It analyzes the effects of consumer awareness on their behavior in the context of family health, well-being, and social values. Most consumers express positive attitudes toward eco-friendly and organic products and services but often seem unwilling to pay for them. Therefore, this chapter also discusses the growing patterns of consumption economics and the role of regulatory measures that affect green consumerism. The chapter also discusses how to encourage sustainable consumption by reviewing previous researches in marketing, economics, and consumer psychology. Synthesizing these insights, the chapter attempts to identify dynamic approaches for companies such as use social influence, healthy consumption habits, rationalizing the foodlife grid effect, and the body-mind dynamics affecting the consumption behavior.

Consumer Behavior Consumer behavior has a complex interface between the cognitive dynamics of an individual and external influences. Societal values, culture, market trends, and perception of individuals widely affect the consumers

© The Author(s) 2021 Rajagopal, Sustainable Businesses in Developing Economies, https://doi.org/10.1007/978-3-030-51681-9_3

67

68

RAJAGOPAL

behavior. In addition, the behavior of consumers is influenced by organizational factors, personal traits, and interactions within and outside the community. The individual and group behavior nested in the society build structural attributes of consumption behavior and motivate intraand inter-cultural shifts in the innate behavior of consumers. The buying tendency of the consumers is, therefore, driven by various complex factors that include perceived benefits, perceived risk, ethnic self-identity, familiarity and product awareness. Consumers are also significantly influenced voluntarily or otherwise by the opinion of fellow consumers, product promoters, and those who are engaged in liberal advocacy (Tsai et al. 2020). Consumption has often been dichotomized in terms of its functionalhedonic nature and is closely associated with the level of satisfaction leading to determine the customer value influence.1 As new products are introduced, a firm may routinely pass these costs on to consumers resulting into high prices. However, a less obvious strategy in a competitive situation may be to maintain price, in order to drive the new product in the market with more emphasis on quality, brand name, post-sales services, and customer relations management as nonprice factors. Green consumption is more a social phenomenon than a personality trait based on self-reference decisions. Consumer attitudes, subjective norms, and perceived behavioral control influence purchase intention toward social and sustainable products. The changing trend of social innovation, products and services provided by social enterprises are diverse and the consumers behavior is shifting gradually toward green consumerism (Defourny and Nyssens 2017). Studies that advocate the models of building customer value through traditional relationship marketing discuss the long-term value concepts to loyal customers. Most importantly, these are expected to raise their spending and association with the products and services of the company with increasing levels of satisfactions that attribute to the values of customers (Reichheld and Sasser 1990). In the context of continuous growth of information technology, the digital networks have contributed significantly to the consumer knowledge, emotions, and expression of thoughts as strong tools of interactivity. The perception of consumers is widely driven by the 1 Wakefield Kirk, L., & Inman Jeffrey, J. (2003). Situational Price Sensitivity: The Role of Consumption Occasion, Social Context and Income. Journal of Retailing, 79(4), 199– 212.

3

GREEN CONSUMERISM

69

digital interactions, e-word of mouth, and online reviews to determine the physical and social needs. The consumer behavior develops on a complex platform today, which grows with the following socio-psychological factors (Gavilan et al. 2018): • Consumers’ associated experiences with peers and society, • Seeking social endorsement to validate individual needs and perceptions, • Effects of electronic word-of-mouth, • Referrals to determine purchasing intentions, and • Overall business performance of products and services in the context of companies. Behavioral touch points like self-reference, family, peers, society, ethnicity, culture, education, communication, and community values influence consumers in developing and streamlining their perceptions and attitudes toward buying and consumption. Customer-centric companies develop corporate strategies to create consumer behavior and implement repeatability formulas to expand homogeneity in the consumption pattern. Due to the accessibility of information technology, consumer behavior tends to shift geo-demographically. Most companies, therefore, prefer to develop crowd-based business involving consumers, society, and stakeholders. Alternatively, companies are also engaged in developing hybrid approaches. The conventional consumer behavior has two common characteristics that exhibit consumption discipline and socio-psychological factors affecting consumption economics (Zook and Allen 2003). Social motivations to consumers are revealed as social self-concept, which drive consumers in developing consumption behavior. Hence, to enhance the scope of social brand, marketing firms stimulate perceptions of consumers and help in developing attitudes across geo-demographic consumer segments. Most consumer-centric companies implement educational marketing campaigns through social media and informal networks, to reinforce the ethical, environmental and societal benefits of organic production (McEachern and McClean 2002). Social media delivers transformational effects on consumers and often alters their conventional consumption behavior. Consequently, the technological affordances of social media and indulgence of consumers in sharing and believing user

70

RAJAGOPAL

generated contents have engendered new forms of consumption practices in the utilitarian and hedonic products and services segments. Nonetheless, the community interactions through social media empower consumers to analyze shared experiences on digital network and form consumption opinions on social marketers. Producing new cultural and sustainable products, and socializing access to sustainable luxury brands (Zhang 2017). The key challenge for the firms to market their brand against private labels is to strengthen the perception of individual benefits by adding more and stronger emotional values to corporate brands. An increase in customer value may be attributed mainly to an increase in the perceived values of brands in the market, while the price effect measures value change caused by adding unfamiliar brands toward over-the-counter products to the existing private labels. Social media generates consumer value on social and sustainable products derived from experiences, which is conceptualized as experiential value. Social values drive customers hedonically as social communications embed sensory feeling, and emotional and social stimulation toward sustainable, economic, and luxury brands. The enjoyable, pleasant, and meaningful experiences to customers, stimulate customer needs and conjure positive responses such as customer involvement toward a brand leading to build repeat buying attitude (Grewal et al. 2009). The customer value seemed to decrease as the prices of the familiar brands increased in a large proportion and the price increase was most pronounced among the users of new brands. However, risk aversion has been found as major emerging variable, while involvement and environmental concern are significant in determining the consumer behavior toward new, unfamiliar brands and private labels (Paladino 2005). Social media has led the consumers to enjoy, enrich, and express their views on the product and services, which not only have an emotional appeal but also build consumers’ attitude toward the brands. Digital networks have widened the scope of consumer interactions with peers and the firm in real-time using integrated functions, such as “like,” “comment,” and “share” as tools of personal expressions. Experiential value in social networks is the core outcome as the interactive platforms enhance the brand manifestation to facilitate the customer experience. Consequently, the experiential value is crated jointly by the social media and firm’s initiatives in inculcating positive brand attitudes and engagement behavior over time (Varshneya et al. 2017). Companies tend to

3

GREEN CONSUMERISM

71

develop consumer attitude through the social media, brand communication, corporate governance, and customer value. The buying attitude of consumers toward products stays sustainable, as the perceptions of consumers are governed by the popularity and image through celebrity endorsements and peer expressions in the marketplace. Accordingly, attitudes of consumers are driven by the social and personal perceptions on product attributes, price, and the perceived use value. The social and celebrity endorsements can significantly influence consumer purchase attitudes via both direct and indirect effects (Sheu 2010). Consumer culture is an integrated pattern of behavior that is consistent and compatible in its components. It is not a collection of random behaviors of consumers, but the behaviors that are related and integrated by the firms in a marketplace. It is a learned behavior and not biologically transmitted. It depends on market environment and referrals. Consumer behavior is driven by motivations of the firms and consumer perceptions. Convenience and connectedness have been the principal driving forces of digital networks, which provided access to consumers with mobile technology for acculturation beyond the niche community. With the increasing virtual mobility of consumers, the definition of consumer community has become fluid as consumers transiently acquire external cultures and demonstrate multiple identities as buyers (Yu et al. 2019). International firms are familiar with the reference groups, social class, consumption systems, family structure and decision-making, adoption and diffusion, market segmentation, and consumer behavior to understand the consumer culture in the marketplace. Global firms make the corporate culture visible to the consumers and elevate it to priority status, often by highlighting desired values and behaviors that favor consumers. Consumerism is co-constructed with the social media and digital technology today. The cross-cultural attributes of consumerism have led lifestyle beyond community and enabled people to have their voice, views, validity, and value heard with liberal ethos. The diffusion of culture on social media is sometimes vehement that damages the brand image and it is not content neutral. The collective intelligence in consumerism reflects and reinforces the dynamic consumption culture (Ali et al. 2019). However, consumers might purchase a product from an online retailer after being influence by the digital stimuli but their actual consumption experience in the brick-and-mortar stores might help them in building consumption attitude as the consumer philosophy of touch, feel, and pick is more powerful than the virtual influence. On the contrary, consumers

72

RAJAGOPAL

in remote parts of developing countries adopt mobile financial services to improve their lived experience of the offline consumerism (Rahman et al. 2019). The retail self-service stores that largely operate in chain are based on the rationale of touch, feel and pick, which provide consumers a wide range of options to make buying decisions. Consumers find the environment significantly positive and exhibit higher levels of approach and impulse buying behaviors, and experience enhanced satisfaction than when retail ambience is congruent with the arousing qualities (Mattila and Wirtz 2004). Visual effects associated with the products often stimulate the buying decisions among young consumers. Point of sales brochures, catalogues and posters build assumption on perceived use value and motivational relevance of decisions of buying the product. Emotional visuals exhibited on contextual factors such as proximity or stimulus size, drive perception and subjective reactions on utility and expected satisfaction of the products (Codispoti and de Cesarei 2007). As consumer philosophy today is woven around the practice of touch, feel, and pick of products and services, the perceptual process among consumers is observed in four stages beginning with sensitive feeling, attention, review, and cognitive affirmation. The consumer perception is backed also by ACCA factors comprising awareness, comprehension, conviction, and action. Advertisements, in-store and online promotions, marketing events, referrals, and social media help in generating awareness among consumers to develop self-perceptions on the products and services. Consumers explore further information on the seeded perceptions to comprehend their knowledge and rationale in developing conviction toward the purchase decisions. Conviction is a state of cognition, which builds inclination toward the products or services to buy. Consumer perceptions justified over the conviction may turn into action, as consumers finally buy the products or services (Rajagopal 2011). Ethical consumerism and family consumer decision-making, including the influence of children, are the emerging spheres of consumer behavior as the globalization effect advances across the markets. In a family-led consumer decision, motivation to pursue an ethical lifestyle is an important attribute associated with an inheritance factor, where elder members of family are awakened to ethical issues. However, prominence of ethical trade-offs in consumer decision-making, ethical choices as normalizing behavior, and finally the presence of pester power in the ethical context also influence the lifestyle and consumerism in the family (Carey et al.

3

GREEN CONSUMERISM

73

2008). The self-reference criteria and lifestyle has driven many consumer decision-making styles including recreational and hedonistic consciousness, perfectionism consciousness, habituality and brand loyalty, confusion by over choice, price and value consciousness, brand and fashion consciousness, and impulsive and careless behavior. In addition, eight lifestyle attributes have also emerged among urban consumers concerning activities, interests and opinions dimensions, including working activities, shopping activities, interests related to home, interests related to family, interests related to fashion, fashion as self-representation, opinion about themselves and opinion about products (Kwan et al. 2008). Emotional response to products and services influence consumer attitudes, consumer acceptance, choice, and purchase intentions. Ethical consumption can be referred as prioritizing the choices of products and services within their ethical concerns. Consumers’ ethical concerns include consumption of sustainable products, environmental protectionism, social and cultural products, animal welfare, human rights, and other factors. Emotions have a significant impact on consumers’ attitudes and behavior, which influence their perceived values and purchasing decisions. Personal ethical norms and social concerns determine ethical buying behavior of consumers, which are widely influenced by the social and perceived values (Kushwaha et al. 2019). The process of consumer behavior development through principal behavioral drivers and discrete touch points are illustrated in Fig. 3.1. Consumer behavior is a process which is evolved within the market, society, and consumer personality ecosystems leading to a synchronic path of satisfaction, loyalty, and behavioral continuum toward buying decisions among consumers. Figure 3.1 illustrates that elements of societal and market ecosystems lead to behavioral outcomes through a linear path of consumer perception, attitude, and cognitive ergonomics. Consumers prioritize their needs and lean toward the products and services that provide utilitarian or hedonic pleasure. The hierarchy of needs is widely influenced by the society, which develops social selfconcept among consumers. The social self-concept, values and lifestyle, and consumer personality induce decision-support concepts like anthropomorphic culture, me-too feeling, and value for money. Consumers continue with their perceptions as they get a social endorsement to their initial decisions. The long-standing perceptions of consumers become attitude over time lead to the self-actualization and self-esteem of consumers. The prolonged satisfaction on products and services

Discrete Touch Points Behavioral antecedents Disrupon and social effects Customer advocacy Shis in social ideologies Cross-cultural effects

Consumer Atude Social value and lifestyle Social interacons Self-actualizaon Self-esteem Change proneness Social leadership Brand associaon Prolonged sasfacon

Fig. 3.1 Attributes and process of consumer behavior

Ecosystems Market Society Consumer

Consumer Percepons Hierarchy of needs Ulitarianism vs Hedonism Social self-concept Anthropomorphism Me-too feeling Perceived use value Value for money Cognive Ergonomics Emoons Personal esteem Self-expressions Explorave tendency Self-referencing Co-evoluon with market Adaptaon to vogue Analyzing knowledge

Behavioral Drivers Innovaon and technology Corporate communicaon Social networks and collecve intelligence Awareness and affordability Social dynamics and comparisons Globalizaon and welfare markeng Sustainability, wellbeing, and family

Behavioral Outcome Sasfacon Loyalty Connuum

74 RAJAGOPAL

3

GREEN CONSUMERISM

75

strengthen brand association with consumers and turn consumers as brand ambassadors within their social niche. In addition to social influences, consumer behavior is also affected by the cognitive ergonomics of consumers comprising emotions, personal esteem, self-expressions, and self-referencing. Consumers coevolve in the market within their cognitive ergonomics and adapt to the contemporary trends in consumption. In addition, the external behavioral drivers that affect consumer behavior consists of innovation and technology, corporate communication, social networks, and collective intelligence. Behavioral antecedents, disruptive innovations, social ideologies, and customer advocacy tend to shift the consumer behavior discretely. Buying motivation among consumers also drives functional values of consumers such as perceived use vale, longevity of the product, and value for money, which influence their buying decisions. In addition, the aesthetic sense that inculcates hedonic or emotional values of the products among consumers develops product attraction and metaphoric concerns. These factors influence consumer perception, attitude, and behavior in the long term. Promotional offers combined with price offers also attract consumers toward buying products and services. Social referrals, experimentational behavior, and product attractiveness also motivate consumers to develop purchase intentions and attitude toward brands over time (Sheth et al. 2011). A study on cigarette smoking found that consumers adapt to the aesthetic/emotional motives to decide whether or not to smoke. The social psychology on smoking motivates or demotivates consumers in getting associated with such consumption practice. Consumers need to justify their perception before falling for motivations and making appropriate decision. Feeling intelligent, feeling confident, or feeling safe might be the right justification criteria to make the decision whether to smoke. Unless regulated by the government, companies generally offer unclassified and uniform motivations to consumers irrespective of personalized filtering criteria such as age, gender, income, and occupation. In addition to the motivational norms for consumers, challenge in the society or feeling to do somewhat different also motivate consumers to adapt to smoking attitude. However, quitting smoking intentions can also be dominated by the emotional motives like fear of getting cancer, or dissonance in the family (Kees et al. 2010). Social capital, which is a valuable asset in improving the knowledge of stakeholders, positively affects the consumers’ purchase intention toward

76

RAJAGOPAL

organic foods and stimulates actual purchase behavior. Consumers constitute a functional element of social capital in managing families; they tend to share among the peers their knowledge and experience about food and family wellness (Hung et al. 2013). Contemporary knowledge and experience sharing among consumers in interpersonal or digital platforms helps in developing trust on the acquired knowledge. Trust significantly mediates relationships between revealing information, perceived knowledge, and organic purchase intentions. Attitudes toward organic foods and subjective norms also significantly influence organic food choices among women consumers (Teng and Wang 2015). Social influence and perceived knowledge develop cognition in the form of beliefs, utilitarian attitudes, and behavior toward consumption of organic products. Consumers also feel hedonic pleasure in paying premium price for organic products to cater to health and family wellness needs (Lee and Goudeau 2014). External Influence on Consumer Behavior Innovation and technology are also responsible for the continuous shifts in social and cultural values and lifestyles, and influencing the consumer preferences and consumption patterns. The acquired and shared culture among consumers drives awareness about the new trends, which in turn arouses new consumer preferences. The experience sharing over the digital platforms further influences the consumer behavior over a long time. Patterns of consumerism are changing in the society, as there are shifts in the consumer demography in the markets. The explosion of mass consumer segment, urbanization, and increase in the size of the population of aging consumers have contributed significantly to the shifts in consumer preferences and overall consumption behavior. Direct-to-customer marketing strategies, convenience shopping, and social media-driven marketing approaches of companies have increased social and cultural influence on developing the consumer behavior. However, disruption in technology, and attraction toward local consumption also contribute in driving the consumer behavior dynamics across geo-demographic segments. Extended technology lifecycle builds positive consumer perceptions on higher value for money. The cocreation and codesigning approaches of customer-centric companies like IKEA have established business philosophy of connecting consumers and developing an emotion-based relationship with consumers as the key to leveraging loyalty and advocacy behavior (Rajagopal 2019).

3

GREEN CONSUMERISM

77

Social innovations also induce consumer behavior toward sustainable products and services, and generate social well-being. Social innovations are often seen as the products of social entrepreneurs, and are motivated by the knowledge-intensive social services. Social innovations are initiated with the crowd-based interactions and initiatives. Crowdsourcing has evolved along with the advancement of information technology on open innovation platforms. The ideation process of social innovation has been enriched by the consumers, stakeholders, and corporate executives across geo-demographic segments. Sustainability-driven innovations are often skewed by social bias while evaluating the ideas within a narrow knowledge base. Social innovations today are generated through open innovation. Social organizations and companies engaged in corporate social responsibility projects rely on consumer preference and evaluative criteria to design innovations, which are supported by the crowdsourced ideas. In the crowd-based social innovation process, consumer engagement along with specialized expertise makes random ideas to be debated within the consumer communities. The crowdsourced and shared value on social innovation is driven by the predetermined or embedded social purpose like conservation of natural resources (land, energy, and water), sectoral production (farm and non-farm production), and organic consumption. Such social concepts involve reemphasizing corporate social responsibility projects of a company and founding its social business objectives. Multinational company Nestlé initiated its organic coffee farming project in Columbia as a social responsibility project in 2003. Expocafé S.A. is a limited-liability private company founded by all Colombian coffee growers’ cooperatives. In order to gain direct access to international buyers and explore marketing opportunities. However, the cooperative faced several challenges with the management, technical costs, manage risk, and in overcoming cooperatives access to global markets. Nespresso, a subsidiary of Nestlé, began acquiring from Expocafé a particularly distinctive variety of coffee grown by farmers in Caldas, and spent a further year researching to improve organic cultivation and explore new aromas for adding to its brand. Nespresso also increased its focus on measuring farmers’ income as the program evolved (McFalls 2017). Similarly, Danone, a French agrifood company, has refocused the company on its origins as a manufacturer of healthy food since early this century. Collective intelligence also helps in defining the need to develop social innovation. Firms engaged in social innovation, therefore, conduct extensive research to map comprehensive view of the social problem.

78

RAJAGOPAL

Before launching a micronutrient-reinforced spice product for lowincome consumers in India, Nestlé studied nutritional deficiencies in the country and visited 1500 households to understand their cooking customs and diets. Lucky Iron Fish Enterprise2 of Canada, which was on the 2016 Forbes list, engaged in selling a cooking tool that acts as a reusable iron fortifier and contributes to addressing the problems of iron deficiency and anemia that afflict a large number of people across the globe. The fish-shaped tool is made up of specially formulated iron which is released in a safe and consistent amount when boiled for ten minutes in acidified water or broth. It can be reused for up to five years and does not change the taste, color, or smell of the food. Clinical research has shown that its use increases the levels of both circulating and stored iron. The initiative has won numerous awards since its inception. This product is an emerging example of social innovation, which is designed and developed through the crowd sourced ideas to cater to the social health needs. Successful social innovations and sustainability-led corporate social responsibility projects periodically measure the shared value generated through crowdsourcing and social interactions. Coca-Cola spent months in monitoring and measuring the shared values on employability of youth in Brazil. This helped the company plan how to achieve business and social goals and then established intermediate measures to track progress. Entrepreneurs and firms develop social innovations by analyzing the social resources comprising, social capital, capabilities, stakeholders, interactions, and outcome. They identify strategies based on the existing or acquired competencies for activation, integration, codesigning, and co-creation appraising a qualitative way through shared values and the conditions to make each strategy feasible (Arena et al. 2020). Effective social innovators enlist external stakeholders in their efforts to understand social needs and to execute their strategies. The right market for a social innovation depends on whether the entrepreneur or firm has a clear social purpose and understood the targeted problems. Creating social and sustainable innovation, therefore, should be aimed at delivering the frugal and long-term solutions and building a strong business case for social marketing. Innovation is critical to social and economic growth as most companies tend to develop local business models to explore marketing opportunities. Consequently, large companies have shown interest in

2 For details see https://luckyironfish.com/.

3

GREEN CONSUMERISM

79

sponsoring and acquiring technology-led start-ups enterprises and making them more competitive in the regional marketplace. Social entrepreneurs use traditional techniques to go to market and scale-up quickly with limited resources against large companies that emulate market strategies not only to innovate quickly, but also to commercialize innovation rapidly across the market layers. Therefore, the behavior of large companies deters the local innovation and its growth initiatives. Consumers develop perceptions by self-generated stimuli, and by drawing inferences from other people in the society. The social perceptions make consumers learn about the feelings and emotions from anchor personalities in the society by analyzing information on physical appearance, and verbal and nonverbal communication. Self-perception by customers relates to values and motivations that drive buying behavior. Visual attraction of products, emotions, self-congruence and perceived experience, knowledge and beliefs, and psychosocial insights about the products, drive the perceptions of consumers, which later helps in developing attitude and behavior in future. Brand advertisements that create high cognitive stimuli generate positive perceptions and attitudes toward buying among consumers. Such brand promotion strategies result in a more positive attitude, and tend to develop behavior over long run. Music congruence in radio commercials drives the listeners toward the embodied meaning of advertisement with the varied degree of stimulation. However, digital marketing strategies with hybrid self-experience stations attract more consumers to experience the products online, develop and share experience, and measure the perceived use value (satisfaction) of the products. Such web exposure for the product and services are accessible to a large number of consumers today, which drives them to develop perceptions and attitude for the products and services of their choice (Potter and Naidoo 2009). Differences in consumer perceptions cause change in the level of satisfaction, which consequently disrupts the cognitive processes. Positive perceptions on products and services develop positive attitude toward buying and consumption. Thus, purchasing attitude built on experiential perceptions are stronger than perceived values that are grown merely on social media (Carter and Gilovich 2010). Consumers also intend to acquire knowledge on brand origins which significantly influences judgments on product quality, brand attitudes, and choice behavior in the marketplace. Consumer behavior toward brands in the premium markets and regular markets are generally driven by push

80

RAJAGOPAL

factors including brand equity, brand personality, and brand endorsements, while brand strength is determined by the consumer pull factors like price advantage, social status, and perceived use value in the various geo-demographic market segments (Rajagopal 2009). Consumers behave in four different ways in the market— proactive, reactive, interactive, and inactive. All four ways of expressing consumer behavior refer to their cultural background. Proactive consumers are experimental to new products, and are prone to accept the cultural changes induced by the market. The proactive consumers are largely induced by the markets through lifestyle interventions and cross-cultural fusion. Reactive consumers are critical to new products, strategies, and corporate initiatives, and prefer the conventional culture that has grown over the period in the society. The reactive consumers are aggressive in sharing their experience, and are often critical about the products and services of the company. Interactive consumers express their views logically, and analyze the products and services of a company rationally and comparatively. Inactive consumers are passive and nonresponsive. Consumers in the acquired culture are prone to behavioral changes, adapt to modern values, and are interactive in the market. These attributes of acquired culture drive multinational companies to develop dynamic marketing strategies, build their brand, and augment market share (Rajagopal 2016). Consumer culture existing in the society, and the language appeal of communications also affect the consumer perceptions, attitudes, and consumption behavior. Material culture affects the level of demand, the quality and types of products demanded and their functional features, and the means of production of these goods and their distribution. Material culture includes the tools and artifacts, the material or physical things in a society excluding the physical things found in nature unless they undergo some technological procedure. Language determines the brand etymology. It is an important cultural tool for developing consumer behavior. Brand names in reference to linguistic assets such as phonetics (sounds), etymology (roots of words), and rhetoric (persuasive discourse) enhance the consumer awareness and knowledge, and develop the consumer perceptions. The quality of translation of brand communication from the original source also affects the consumer perception and psychodynamics of consumers. Social institutions play significant role in nurturing the cultural heritage, which is reflected in the individual

3

GREEN CONSUMERISM

81

behavior. Such institutions include family, education, and political structures. Media affects the ways in which people relate to one another, organize their activities to live in harmony with one another, teach acceptable behavior to succeeding generations, and govern themselves. The status of gender in society, the family, social classes, group behavior, age groups, and how societies define decency and civility are interpreted differently within every culture. Social institutions are a system of regulatory norms and rules of governing actions in pursuit of immediate ends in terms of their conformity with the ultimate common value system of a community. A word-of-mouth recommendation from a trusted source is perceived to be more influential than corporate communication. Consumers attracted by the product campaigns may feel the taste of traditional marketing, however, a word of mouth cuts through the traditional advertisements quickly and makes a place in the consumers’ mind effectively. The grapevine effect triggered by the word of mouth is the primary factor among a large segment of consumers in making their purchasing decisions. Its influence plays pivotal role when consumers tend to buy a product or service for the first time or when products are relatively expensive. The information factors driven by social media tend to make people conduct more search, seek more opinions, and deliberate longer among the peers than they would otherwise do. The influence of word-of-mouth will probably grow along the digital revolution and help consumers in making buying decisions. Thus, one-on-one communication designs the consumer opinion by analyzing personality of products or services, interventions in decision-making, responsiveness of brand or a company, and trust.

Sustainable Consumption Building the social behavior of sustainable consumption involves transforming the entire value chain from the product design, production, supplies, operations, sales and marketing, and end-of-lifecycle management of products and services. Local entrepreneurs and large companies engaged in manufacturing and marketing of sustainable products tend to uncover opportunities and risks in new markets, set priorities, and launch coherent consumer education and marketing programs. Consequently, a sustainable enterprise can be developed by diagnosing the social and

82

RAJAGOPAL

individual behavior of consumers to identify opportunities for promoting growth through the following business process chain: • • • • • • •

Developing new products Identifying new markets Constructing new business portfolios related to sustainability Improving return on capital through green sales and marketing Managing sustainable value chains, Improving efficiency in sustainable operations, and Managing risk in the context of regulatory norms, reputational challenges, and operational contingencies.

In managing business processes the sustainable growth strategies of companies can be compatible with the market ecosystem. Pursuing green growth through portfolio investment decisions, green products and technologies, and opportunities in new markets and segments have emerged in the recent past as major challenges for small companies operating in a niche business environment. However, crowdfunding, government support programs, public policies, public–private partnerships, and international funding have been supportive to the management of these enterprises. For example, a big European investment bank in developing a business-led green growth strategy by exploring how climate change was affecting its clients and what opportunities this presented. Among other companies Organic Valley, a dairy- and agri-food product company, operates on sustainability-led business model which ensures sustainability chain in production and marketing process. Organic pastures not only provide grazing cattle with their natural diet, which minimizes their impact on our air quality, reduces the need for antibiotics, and supports healthier land. they also actually absorb carbon from the atmosphere. Farmers supported by this company are dedicated to keeping their cows on pasture as much as possible, and caring for their land in a way that sustains life for all members of the ecosystem. Sustainability companies with large and diverse activities spread across many sectors and countries face varied complexities of operations, stakeholder values, and marketing. These companies have major problems of boards growing in different geo-demographic destinations due to varied sociocultural values. Companies with sustainability focus prioritize, coupled with public policy standards and lean processes and systems to

3

GREEN CONSUMERISM

83

carry out business at global scale. To address risk as well as growth potential, companies face uncertainties in evolving technologies, consumption behavior, and market for sustainable products. The automobile companies undergo major challenges to market batteries for electric vehicles, which explored a range of scenarios for regulatory change. To support longterm implementation, most sustainable companies provide training for their managers and education to consumers on a wide range of sustainable products and services. Such efforts sensitize the market players including supplier, stakeholders, and consumers on public concerns such as climate change, organic products consumption, and use of sustainable products related to energy and water. Systematic assessments of the risks and opportunities in sustainability-led businesses help local enterprises and international companies to develop market competitive strategies to manage the cost-revenue cure. The factors affecting sustainable consumption practices are illustrated in Fig. 3.2. Developing sustainable consumption practices is a long-term project, and possesses risk of negative perception among consumers due to transformative approaches. Sustainable consumption is influenced by internal factors comprising consumer behavior consumption pattern, and social values as exhibited in Fig. 3.2. In addition, public policies, corporate strategies, and business modeling affect the consumption pattern of sustainable products and services as external or macro factors within in the business environment. In order to induce sustainable consumption behavior, social and business organizations are required to educate consumers on the concepts and benefits of sustainability as this concept has yet to touch the core of consumer community in general. Consumer education inculcates a logical cognitive process of awareness, perceptions, attitude, and behavior, which validates the shifts in the consumption pattern. Social media, collective intelligence, and family values drive conscious consumption in the long term. Consequently, the success of experimentation and self-referencing in decision-making lead to repeat buying, and justify values and benefits within the consumption economics. The social resource-based views, people’s action and rural technology, environmental consciousness on community welfare such as health, housing, and social entrepreneurship constitute social values. Sustainability projects often attract large companies to acquire or sponsor frugal innovations and reverse innovations at the local level. Often local sustainability projects are proposed for strategic alliances with venture capitalists, technology firms, and large commercial organizations.

Social, Economic, Polical, and Technological Factors

External Drivers

Sustainable Consumpon Pracces

Internal Drivers

Global-Local Effects Acquisions Alliances Sponsors

Fig. 3.2 Ecosystem of sustainable consumption practices

Business Modelling Financial resources Crowdfunding Customer-centric focus Business-to-business dealing Markeng strategy Product compeveness Market compeveness Innovaon and technology Cost-me-risk-profit matrix Short-term vs long-term benefits

Consumer Behavior Consumer educaon Percepon on sustainability Product aracveness Collecve intelligence Family, wellbeing, and values Conscious consumpon

Consumpon Paern Experimentaon Repeat buying Family and self-reference Consumpon economics Values and benefits

Corporate Strategies Corporate social responsibility Sectoral sustainability Stakeholder engagement Sustainable producon and technology Public-private partnership Government norms and regulaon Long-term social business goals

Public Policies Global-local concerns Funding programs Monitoring and evaluaon Social benefits Polical ideology Internaonal funding SDG implementaon at grassroots

Social Values Social resource based views People’s acon and sustainability Community welfare and environment Health, housing, and social producon Governance and social benefits Social values and macro perspecves

84 RAJAGOPAL

3

GREEN CONSUMERISM

85

External drivers that affect sustainable consumption practices include public policies, corporate strategies, and business modeling as illustrated in Fig. 3.2. Public policies exhibit global-local concerns, delineates funding programs and social benefits within the political ideology. The government emphasizes implementation of sustainable development goals (SDGs) at the grassroots. Most companies design and implement sustainable projects in various sectors as corporate social responsibilities. Firms encourage stakeholder engagement in sustainable production and use of technology in key sectors like agriculture, energy, water conservation, and food products manufacturing. Business modeling for sustainable products largely focuses on both business-to-consumers and business-to-business activities. The marketing strategies are woven around 11Ps as detailed below: • Product-sustainable, organic, attractive, innovation, social needbased, utilitarian • Price-affordable, competitive • Place-availability, backward and forward logistics, niche markets, proximity • Promotion-diet concept, social value, value and lifestyle, ethnicity, anthropomorphic perceptions, endorsements • Packaging-sustainable, green effect, circular economy based, recycled • Pace-first mover advantage, psycho-social standing, top-of-the-mind memory • People-consumer education, customer advocacy, motivators, gatekeepers, community and family • Performance-success stories, visual information, evidence-based marketing • Psychodynamics-social networks, interpersonal communication, digital forums • Posture-social values, social branding, sustainability, people, global values • Proliferation-diversification in sustainability activities. It is a big challenge to develop market competitiveness in the sustainability business as it is complex to make decision along the cost-time-risk-profit matrix related to the social products and services. The buying power of customers determines the extent to which they retain most of the

86

RAJAGOPAL

value created for themselves. The threat of substitutes determines the extent to which some other product can meet the same buyer needs and place a ceiling on the amount a buyer is willing to pay for an industry’s product. Consumers gain power when they have choices, when their needs can be met by a substitute product or by the same product offered by another company. In addition, high buyer concentration, threat of backward integration, and low switching costs add to buyer power. The customer satisfaction is largely value driven, and it has been observed that the values generate customer loyalty over the period. However not all loyal customers are profitable, and not all profitable customers are loyal (Rajagopal 2012). Consumer behavior is also significantly driven by trust and transparency without hidden agendas in business negotiations. Above all, trust means truth that is an outgrowth of religious sentiments in the society or an individual. Spending potential of consumers in different geo-demographic segments affects the consumption patterns. Low disposable income among consumers leads to subsistence consumption pattern, which is observed in the bottom-of-the-pyramid geo-demographic segment. Consumer perceptions are affected by various personal and market attributes comprising income levels, occupation, education and learning skills, finances, digital activities, self-congruity and desires, social relationships, and expectations and fears, that determine their consumption behaviors and spending patterns (Silverstein and Sayre 2009). Credit availability across product categories also affects the consumption patterns in different geo-demographic segments. Individual decisions to cut back on consumption, or perhaps increase the dependability on the credit cards to maximize the credit utilization, build compulsive buying and consumption behavior among consumers. Such credit-linked consumption behavior aggregates into tremendous volatility and risk for the companies toward recovering the debts. Companies, like the auto dealers attract consumers by offering various financial promotions. As consumers develop purchase orientation, and lean toward buying credit-linked products frequently, companies tend to create more dependency on credit among consumers (Jarvis and Macmillan 2009). Consumption of organic food products in mass consumer segment is associated more with social value and lifestyle (SVALS) than mere commercial campaigns. Among many social, cultural, and economic factors, the consumer-centric attributes that significantly drive the consumption pattern toward organic food include age, disposable income,

3

GREEN CONSUMERISM

87

knowledge, socio-demographics, purchase frequency, spending capacity, consumption period, retail outlets, perceived values, self-image congruence, and perceptions about organic foods (Sultan et al. 2018). Consumption of organic food products (OFP) has been increasing consistently over the recent years, which is based more on emotions attached with SVALS than attaining the consumer wellness. Thus, a small number of households, who spend less than half of their budget on organic products on an average, is responsible for majority of organic purchases (Buder et al. 2014). Consumers with higher level of education and higher disposable income tend to buy organic food products. Commonly, families with growing children develop purchase intention toward organic food. However, the principal barriers to higher market share of organic foods are lack of knowledge among consumers, relatively high price premium, and lack of availability of OFP in emerging markets. Generating awareness about OFP and educating consumers about the attributes of organic production methods influence their consumption behavior toward organic foods. Such awareness among consumers has increased the demand of organic food products, which has pushed companies to develop promising strategies for marketing of these products (Xie et al. 2015). Health as a prime value for life, has been the dominant understanding among women while explaining the reasons for their preference for organic food products. Since consumers take lead in catering to family members, strength and valence of emotions influence the food choice, food service, and food intake in the family. Consumption of healthy foods including low-fat dairy, and organic fruits and vegetables regulates the mood and food balance among women and their family members (Chrisinger et al. 2018). The influence of emotion and mood on food choice and intake has recently gained prominence in food-related emotion research. Continuous efforts on improving health and family wellness induce consumers keep updated knowledge on food, environment, and consumption habits. It has been observed that women are more positive about organic food as they agree that organic food has more vitamins/minerals than conventional food. The personal value factors related to nature, environment, and equality are the principal determinants of positive organic food beliefs, followed by physical relationship (Lea and Worsley 2005). Food choice, gender, and health consciousness, and interrelation and convergence of these functional attributes develop food consumption behavior among individuals and family. Diet and

88

RAJAGOPAL

sustainability magazines have strong influence on updating contemporary knowledge on food, society, and value and lifestyle. These magazines have widespread readership in all age groups, and have considerable potential for dissemination of information about food and nutrition. Consumers update their knowledge on healthy-eating discourses through social media, and health and fitness magazines. Most magazines targeting health and fitness largely exhibit food as pathogenic, emphasizing food’s connection to obesity and health fragmentation, and disseminate knowledge on organic foods for wellness (Rodney 2018). Demographic variables like value and lifestyle, and environmental attitudes define the profile of consumers of organic food. Regular consumers of organic food tend to be educated, affluent, and of higher social class. Consumers with higher education, knowledge, and income have higher awareness of food hazards and the benefits of organic food consumption. Consumers prefer imported organic food from countries that are close to their city of residence. Customer values are created toward new products through individual perceptions, and organizational and relational competence. Firms need to ascertain a continuous organizational learning process with respect to the value creation chain, and measure the performance of the new products introduced in the market. In the growing competitive markets, the large and reputed firms are developing strategies to move into the provision of innovative combinations of products and services as “highvalue integrated solutions” tailored to each customer’s needs than simply “moving downstream” into services (Davies 2004). Product attractiveness comprises the product features including improved attributes, use of advance technology, innovativeness, extended product applications, brand augmentation, perceived use value, competitive advantages, corporate image, product advertisements, and sales and services policies associated therewith, which contribute in building sustainable customer values toward making buying decisions on the new products (Lafferty and Goldsmith 2004). The attractiveness of new products is one of the key factors affecting the decision-making of customers and in turn is related to market growth and sales. The higher the positive reactions of the customers toward the new products in view of their attractiveness, the higher the growth in sales and so in market.

3

GREEN CONSUMERISM

89

Retailing, Branding, and Consumption Behavior Globalization has catalyzed the growth of consumer products industry, and the marketplace attractions have driven the cultural attributes of consumers significantly across various consumer segments. Shifts in cultural values, consumer preferences, and purchase intentions toward designer products is arguably the most critical issue faced by the marketing managers today. Many researchers argue that the increasing globalization is reducing the homogeneity of consumer behaviors within countries while increasing communalities across countries (Cleveland and Laroche 2007). Most firms developing innovative products are trying to bridge intercultural differences and building cultural consonance across consumer segments on a variety of contexts that stimulate interest among consumers. Customer-centric market strategy developed on self-esteem attributes of consumer is used by the firms to enhance purchase intentions toward products and services (Horowitz 2009). Circular economy and sustainability-driven consumption practices like green carry bags, natural store aeration, low emission refrigeration, and energy saving lighting have posed major challenges of consumer preferences, values, and satisfaction in retail shopping. Technology growth and a rising middle-class consumer base have contributed significantly in shifting consumption patterns of retail products in the emerging markets. However, in spite of unwarranted consumption dynamics due to high substitution and price related issues, the opportunities for business expansion are capitalizing in the emerging markets. The current consumption and retailing scenarios present uphill challenges for reaching business ambitions of new entrant firms. For example, the growth of the coffee shop industry in China can be explained by considering its key sociocultural dynamics to serve the changing consumption behavior from regular coffee to green coffee. The change drivers to consumption behavior pose several questions about sustainability or following societal vogue in emerging markets. The changing consumer cultures have contributed to a rapidly growing industry; and new customer-centric strategies have evolved to support market competitiveness and maintain consistent growth for retail success in the future (Ferreira and Ferreira 2018). Powerful market stimulants such as fashion shows on television, fashion advertisements, in-store displays, and fashion events in the urban shopping malls have influenced the transnational cosmopolitanism among

90

RAJAGOPAL

consumers. Such interactive marketing strategies have shown convergence of traditional and modern values and lifestyle to develop a homogeneous global consumer culture. The conventional method of using societal icons as the cultural drivers have now been replaced by global retail players with flagship brands as a basis for product position and market segmentation. It is found that multichannel systems of brand building and differentiation influence the consumers toward innovative products and need is created at local levels supportive of, and constituted by, cultural industries. The principal stimulants for the company to expand its business, which include internal and external resources, are as discussed below: • Consumers – Social and cultural characteristics, consumption behavior, spending capability, stakeholder leadership, and social business responsibilities. • Innovation and Technology – Ideation lead by consumers for new product development, adaptability to technology, cost to company on innovation and technology, returns on investment by innovations. • Political and Economic Scenario – Government regulation on local and international business operations, import and export regulations, tax structure, repatriation of profit and transfer of funds, modes of business, and public equity management. Globalization, increasing competition, and short product lifecycles in retailing cultivate asymmetric consumer behavior and pose a number of marketing challenges for retail firms. In order to survive in this industry, it is vital for manufacturers and retailers to develop and leverage core marketing capabilities. According to Optimal Distinctiveness Theory, individuals strive to maintain a balance between the need to be assimilated by the peers and family, and the need for autonomy and differentiation. Optimal distinctiveness is a social psychological theory toward understanding internal and external differences within a group of people or consumers. Consumers often form their groups of interest to share experiences and information

3

GREEN CONSUMERISM

91

about consumption practices. Hence, the distinctiveness theory explains the consumer behavior very closely. This concept asserts that individuals desire to attain an optimal balance of inclusion and distinctiveness within and between social groups and situations (Brewer 1991). The distinctiveness behavior exhibits following traits among consumers that direct their decision on consumption: • • • • •

Conformity Differentiation Valuation Identity, and Commonality

The purchase intention for fashion and designer apparel is stimulated among consumers in the social contexts. The distinctiveness of fashion features (e.g., designer brand, celebrity endorsement, media reviews) that are consistently associated with emotional expressions plays the strongest role in the buying behavior among consumers (Calvo and Marrero 2009). Some studies suggest that the perception of a person on his personality is a distinctive and salient trait that differentiates behavior. Individuals who have high social standing and are adaptive to change in lifestyle are driven by the new products demonstrations. The distinctiveness theory supports the notion that ethnicity can influence consumer responses to various marketing stimuli such as sales promotions and advertisements. One of the principal drivers of consumer behavior is the dominance of social interactions. The involvement of consumers’ products depends not only on their own perceptions but also on peers’ response to their personality and change proneness (Pinheiro 2008). The relation between clothes and identity is perceived by the consumers from the perspective of their values generated in various social interactions. Consumers get involved in exhibiting lifestyle as an aesthetic way of presenting their personality. Hence, clothing is often considered as an opportunity for communicating a new order of identity of a person. In this process, there are both cognitive and affective incentives that translate into potential welfare gains (or indifference) for the consumer in a given social and work-related environment (Bianchi 2002). Manufacturers and retailers apply both push and pull strategies to make the promotions effective and advantageous to the consumers. Promotions targeted at final consumers,

92

RAJAGOPAL

known as pull promotions, directly offer extra value to consumers with the primary goals of attracting consumers to retail locations and stimulating immediate sales. Though both push and pull promotions are designed to speed up the selling process and increase sales, at least in the short term, their strategic implications as well as their impacts on sales and profits are believed to be different. Such promotion led retailing culture stimulates debt and spending behavior among consumers (Martin-Herran et al. 2010). It has been observed that the attributes determining overall acceptance of social products among consumers are significantly influenced by product attractiveness and price sensitivity. Purchase intent was influenced by overall appearance, brand appeal, and overall liking (Herrera-Corredor et al. 2007). Such socially stimulated products are largely penetrating in the emerging markets through cross-border consumer influence. personality attributes of consumers toward outshopping include: • Staying alert to the innovation, technology, and new product arrivals in the market • Developing attitude toward experimentation • Portraying uniqueness in consumption by going out of neighborhood preferences • Higher spending and risk-taking attitude • Serving as gatekeeper to the innovations and new products in the markets • Conspicuous consumption. The modern market has emerged with the announcement that ethnic dressing comes from the core of the traditional culture whose gorgeous fabrics have been face lifted as convenience apparel within societal value and lifestyle (VALS) system. It is argued that shifts in consumer culture stimulate dynamic innovation in the arena of personal taste and consumption. Such dynamism in consumer preferences is considered as a part of an international cultural system and is driven by continuous change in VALS. The consumer values like functionality, fitness for purpose and efficiency significantly contribute in driving cultural change and recognizing suitable lifestyles (Hartley and Montgomery 2009).

3

GREEN CONSUMERISM

93

The cultural dimensions of individualism, uncertainty avoidance, power distance, and masculinity should be a useful framework to explain crosscultural differences in customer acceptance of designer products. The personality dimensions often play critical role in shifting the consumer culture toward brand-led buying behavior of utilitarian goods. The designer apparel brands are perceived by the consumers as prestigious brands encompassing several physical and psychological values such as perceived conspicuous value, perceived unique value, perceived social value, perceived hedonic value and perceived quality value. Consumption patterns are largely governed by social value of the product, which determines the purchasing intentions, consumer attitudes, or perceptions on brand or advertising slogan. Consumer experience with high socioeconomic power perceptions creates qualitatively distinct psychological motives toward buying designer apparel that develop unique consumption patterns (Rucker and Galinsky 2009). Companies need to understand the factors that drive consumer stimuli toward getting associated with new products and brands. The cognitive drivers that affect consumer behavior are as discussed below: • Social status to acquire and use specific products • Self-esteem and personality enhancement • Contribution to the society and business by service as lead user and brand ambassador • Satisfying hedonic value and self-governance • Staying in public domain and gain social prominence by getting involved in the green products and with eco-friendly companies Social Cognitive Theory explains how variables such as self-regulation and self-efficacy direct the spending behavior and determine consumer lifestyles. Product attributes influence consumer perceptions of the personal relevance of a product or service to their needs, and consumer preferences for product attributes are significantly linked to their lifestyle. The lifestyle theory suggests that the consumers’ perceived hedonic attributes and social identity factors determine the shopping behavior of urban consumers. The social learning theory explains this phenomenon as positive reinforcement, and it occurs when a behavior (response) is followed by a favorable stimulus (commonly seen as pleasant) that

94

RAJAGOPAL

increases the frequency of that behavior. In the conceptual foundations of social learning theory, respondent conditioning and observational learning are the empirically supported approaches to understanding normative human development and the etiology of psychosocial problems. Consumer perceptions toward the store brands include: • • • • •

Beliefs, trust, and loyalty with the store Home grown and serviceable products Convenience and low cost to customer Customizable and nearer to the consumer preferences Relative advantages on price and quality.

Brands are designed and developed considering consumer perceptions on the store image. The shopping satisfaction includes consumers’ perceptions of store attributes as well as subjective evaluations of products purchased from the store by the consumers themselves or by their fellow shoppers. Brand impact is largely derived also through the word-of-mouth interaction. However, response to the store brands appears to be more complex in nature than a simple affective summary of the relative frequencies of positive and negative emotions during consumption experiences. Another factor that affects the consumer decision on brands is the recognition of the role of store sales personnel in a retail environment. It has been observed that effective sales people influence not only the shopping process, but also influence the consumers to switch their store patronage. Consumers may abandon one store brand to follow specific sales and service personnel to a new store brand (Terblanche and Boshoff 2005). Attitude toward promoted brands is characterized by positive store image, smart shopper self-perception, need for affiliation, and money attitude regarding power-prestige and anxiety. However, attitude of consumers toward store brands is determined by more positive store image, price advantage, range of products to exercise buying options, and loyalty and trust-related factors (Liu and Wang 2008). Consumer attention to any brand, repeat buying, and brand loyalty pose big challenge to retailing industry in the rapidly changing and fastpaced media landscape today. Consumer attention is a psycho-social effect in the age of social media, which is very different from conventional approach to develop consumer behavior. In the contemporary retailing

3

GREEN CONSUMERISM

95

scenario, marketing and branding are central to social media. Advertisements do drive customer emotions, but often fail to offer a strong, consistent, and focused brand identity. However, brands are supported with the servitization approaches to promote products in the retail environments. These brands can retain their effectiveness in this new media reality, as mere exposure is all that’s required to activate their rich brand identity. Social media led consumer awareness develops not only peer confidence but also motivates consumer cognition and behavior. New research shows that virtual exposure to a brand alters consumer behavior consistent with brand identity (Brasel 2012). Some studies have observed that brands drive a positive relationship between customers’ familiarity with and loyalty to the retailer’s own brand, and customers’ loyalty to the retailer results from the competitive advantage of the brand. Although the purchase intentions of consumers toward brands relate positively to higher loyalty to the retailer, the scope of such relationship narrows down the consumer preferences due to the degree of exclusivity of store brands within the customer’s shopping basket (Martos-Partal and González-Benito 2009). Often, consumers realize that whenever the gap between social brands and commercial brands gets smaller with regard to quality, perceived value and confidence, price ultimately becomes the only clearly distinguishing characteristic. Consumer decision on buying is also governed by the price sensitivity factor to a large extent.

References Ali, M., Azab, N., Sorour, K., & Dora, M. (2019). Integration vs Polarization Among Social Media Users: Perspectives Through Social Capital Theory on the Recent Egyptian Political Landscape. Technological Forecasting and Social Change, 145(3), 461–473. Arena, M., Azzone, G., & Piantoni, G. (2020). Shared Value Creation During Site Decommissioning: A Case Study from the Energy Sector. Journal of Cleaner Production, 251 (in press). https://doi.org/10.1016/j.jclepro.2019. 119587. Bianchi, Marina. (2002). Novelty, Preferences, and Fashion: When Goods Are Unsettling. Journal of Economic Behavior & Organization, 47 (1), 1–18. Brasel, A. S. (2012). How Focused Identities Can Help Brands Navigate a Changing Media Landscape. Business Horizons, 55(3), 283–291. Brewer, M. (1991). The Social Self: On Being the Same and Being Different at the Same Time. Personality and Social Psychology Bulletin, 17 (5), 475–482.

96

RAJAGOPAL

Buder, F., Feldmann, C., & Hamm, U. (2014). Why Regular Buyers of Organic Food Still Buy Many Conventional Products: Product-Specific Purchase Barriers for Organic Food Consumers. British Food Journal, 116(3), 390–404. Calvo, M. G., & Marrero, H. (2009). Visual Search of Emotional Faces: The Role of Affective Content and Featural Distinctiveness. Cognition and Emotion, 23(4), 782–806. Carey, L., Shaw, D., & Shiu, E. (2008). The Impact of Ethical Concerns on Family Consumer Decision-Making. International Journal of Consumer Studies, 32(5), 553–556. Carter, T. J., & Gilovich, T. (2010). The Relative Relativity of Experiential and Material Purchases. Journal of Personality and Social Psychology, 98(1), 146– 159. Chrisinger, B. W., DiSantis, K. I., Hillier, A. E., & Kumanyika, S. K. (2018). Family Food Purchases of High- and Low-Calorie Foods in Full-Service Supermarkets and Other Food Retailers by Black Women in an Urban US Setting. Preventive Medicine Reports, 10(2), 136–143. Cleveland, M., & Laroche, M. (2007). Acculturation to the Global Consumer Culture: Scale Development and Research Paradigm. Journal of Business Research, 60(3), 249–259. Codispoti, M., & de Cesarei, A. (2007). Arousal and Attention: Picture Size and Emotional Reactions. Psychophysiology, 44(5), 680–686. Davies, A. (2004, October). Moving Base into High-Value Integrated Solutions: A Value Stream Approach. Industrial and Corporate Change, 13(5), 727–756. Defourny, J., & Nyssens, M. (2017). Fundamentals for an International Typology of Social Enterprise Models. Voluntas: International Journal of Voluntary and Nonprofit Organizations, 28(6), 2469–2497. Ferreira, J., & Ferreira, C. (2018). Challenges and Opportunities of New Retail Horizons in Emerging Markets: The Case of a Rising Coffee Culture in China. Business Horizons, 61(5), 783–796. Gavilan, D., Avello, M., & Martinez-Navarro, G. (2018). The Influence of Online Ratings and Reviews on Hotel Booking Consideration. Tourism Management, 66(1), 53–61. Grewal, D., Levy, M., & Kumar, V. (2009). Customer Experience Management in Retailing: An Organizing Framework. Journal of Retailing, 85(1), 1–14. Hartley, J., & Montgomery, L. (2009). Fashion as Consumer Entrepreneurship: Emergent Risk Culture, Social Network Markets, and the Launch of Vogue in China. Chinese Journal of Communication, 2(1), 61–76. Herrera-Corredor, J. A., Saidu, J. E. P., Khachatryan, A., Prinyawiwatkul, W., Carballo-Carballo, A., & Zepeda-Bautista, R. (2007). Identifying Drivers for Consumer Acceptance and Purchase Intent of Corn Tortilla. Journal of Food Science, 72(9), 727–731.

3

GREEN CONSUMERISM

97

Horowitz, D. M. (2009). A Review of Consensus Analysis Methods in Consumer Culture, Organizational Culture and National Culture Research. Consumption Markets & Culture, 12(1), 47–64. Hung, S. W., Lin, J. Z., & Chen, P. C. (2013). How Social Capital Influences Health Community Members’ Adoption of Organic Foods. British Food Journal, 115(11), 1564–1582. Jarvis, W., & McMillan, I. C. (2009). Consumer Credit: The Next Crisis. Harvard Business Review, 87 (6), 1–16. Kees, J., Burton, S., Andrews, J., & Kozup, J. (2010). Understanding How Graphic Pictorial Warnings Work on Cigarette Packaging. Journal of Public Policy & Marketing, 29(2), 265–276. Kushwaha, S., Dhirb, A., & Sagara, M. (2019). Understanding Consumer Resistance to the Consumption of Organic Food: A Study of Ethical Consumption, Purchasing, and Choice Behavior. Food Quality and Preference, 77 (1), 1–14. Kwan, C. Y., Yeung, K. W., & Au, K. F. (2008). Relationships Between Consumer Decision-Making Styles and Lifestyle Characteristics: Young Fashion Consumers in China. Journal of the Textile Institute, 99(3), 193–209. Lafferty, B. A., & Goldsmith, R. E. (2004, Spring). How Influential Are Corporate Credibility and Endorser Attractiveness when Innovators React to Advertisement for a New High Technology Product? Corporate Reputation Review, 7 (1), 24–26. Lea, E., & Worsley, T. (2005). Australians’ Organic Food Beliefs, Demographics and Values. British Food Journal, 107 (11), 855–869. Lee, H. J., & Goudeau, C. (2014). Consumers’ Beliefs, Attitudes, and Loyalty in Purchasing Organic Foods: The Standard Learning Hierarchy Approach. British Food Journal, 116(6), 918–930. Liu, T., & Wang, C. (2008). Factors Affecting Attitudes Toward Private Labels and Promoted Brands. Journal of Marketing Management, 24(3), 283–298. Martin-Herran, G., Sigue, S. P., & Zaccour, G. (2010). The Dilemma of Pull and Push-Price Promotions. Journal of Retailing, 86(1), 51–68. Martos-Partal, M., & González-Benito, O. (2009). The Effects of Store Brand Loyalty on Store Loyalty: Evidence from the Spanish Market. The International Review of Retail, Distribution and Consumer Research, 19(3), 273–288. Mattila, A. S., & Wirtz, J. (2004). Congruency of Scent and Music as a Driver of in-Store Evaluations and Behavior. Journal of Retailing, 77 (2), 273–289. McEachern, M. G., & McClean, P. (2002). Organic Purchasing Motivations and Attitudes: Are They Ethical? International Journal of Consumer Studies, 26(2), 85–92. McFalls, R. (2017). Good Procurement Practices and SMEs in Supply Chains: Nespresso AAA Sustainable Quality Program Impact of Procurement Practices

98

RAJAGOPAL

in an SME in Colombia. International Labour Office, Enterprises, SME Unit, Geneva: ILO. Paladino, A. (2005). Understanding the Green Consumerism: An Empirical Analysis. Journal of Customer Behaviour, 4(1), 69–102. Pinheiro, M. (2008). Loyalty, Peer Group Effects, and 401(k). The Quarterly Review of Economics and Finance, 48(1), 94–122. Potter, C., & Naidoo, G. (2009). Evaluating Large-Scale Interactive Radio Programs. Distance Education, 30(1), 117–141. Rahman, M., Bose, S., Babu, M. M., Dey, B. L., Roy, S. K., & Ben, B. (2019). Value Co-creation as a Dialectical Process: Study in Bangladesh. Information Systems Frontiers, 21(3), 527–545. Rajagopal. (2009). Branding Paradigm for Bottom of the Pyramid Markets. Measuring Business Excellence, 13(4), 58–68. Rajagopal. (2011). Impact of Radio Advertisements on Buying Behaviour of Urban Commuters. International Journal of Retail and Distribution Management, 39(7), 480–503. Rajagopal. (2012). Brand Manifestation and Retrieval Effects as Drivers of Buying Behavior in Mexico. Journal of Database Marketing and Customer Strategy Management, 19(3), 179–196. Rajagopal. (2016). Sustainable Growth in Global Markets: Strategic Choices and Managerial Implications. Basingstoke, UK: Palgrave Macmillan. Rajagopal. (2019). Contemporary Marketing Strategy: Analyzing Consumer Behavior to Drive Managerial Decision Making. New York: Palgrave Macmillan. Reichheld, F. F., & Sasser, W. E. (1990). Zero Defections: Quality Comes to Services. Harvard Business Review, 68(5), 105–111. Rodney, A. (2018). Pathogenic or Health-Promoting? How Food is Framed in Healthy Living Media for Women. Social Science & Medicine, 213(1), 37–44. Rucker, D. D., & Galinsky, A. D. (2009). Conspicuous Consumption Versus Utilitarian Ideals: How Different Levels of Power Shape Consumer Behavior. Journal of Experimental Social Psychology, 45(3), 549–555. Sheth, J. N., Sethia, N. K., & Srinivas, S. (2011). Mindful Consumption: A Customer-Centric Approach to Sustainability. Journal of the Academy of Marketing Science, 39(1), 21–39. Sheu, J. B. (2010). A Hybrid Dynamic Forecast Model for Analyzing Celebrity Endorsement Effects on Consumer Attitudes. Mathematical and Computer Modelling, 52(9–10), 1554–1569. Silverstein, M. J., & Sayre. K. (2009). The Female Economy. Harvard Business Review, 87 (9), 46–53. Sultan, P., Wong, H. Y., & Sigala, M. (2018). Segmenting the Australian Organic Food Consumer Market. Asia Pacific Journal of Marketing and Logistics, 30(1), 163–181.

3

GREEN CONSUMERISM

99

Teng, C. C., & Wang, Y. M. (2015). Decisional Factors Driving Organic Food Consumption: Generation of Consumer Purchase Intentions. British Food Journal, 117 (3), 1066–1081. Terblanche, N., & Boshoff, C. (2005). The in-Store Shopping Experience and Customer Retention: A Study of Clothing Store Customers. Business Review, 4(1), 118–125. Tsai, J. M., Hung, S. W., & Yang, T. T. (2020). In Pursuit of Goodwill? The Cross-Level Effects of Social Enterprise Consumer Behaviors. Journal of Business Research, 109(3), 350–361. Varshneya, G., Das, G., & Khare, A. (2017). Experiential Value: A Review and Future Research Directions. Marketing Intelligence and Planning, 35(3), 339–357. Xie, B., Wang, L., Yang, H., Wang, Y., & Zhang, M. (2015). Consumer Perceptions and Attitudes of Organic Food Products in Eastern China. British Food Journal, 117 (3), 1105–1121. Yu, Q., Foroudi, P., & Gupta, S. (2019). Far Apart Yet Close by: Social Media and Acculturation Among International Students in the UK. Technological Forecasting and Social Change, 145(4), 493–502. Zhang, L. (2017). Fashioning the Feminine Self in “Prosumer Capitalism”: Women’s Work and the Transnational Reselling of Western Luxury Online. Journal of Consumer Culture, 17 (2), 184–204. Zook, C., & Allen, J. (2003). Growth Outside the Core. Harvard Business Review, 81(12), 66–73.

PART II

Functional Dynamics

CHAPTER 4

Cleaner Energy Consumption

Consumption of green energy is one of the sustainable commitments. The choice of subscribing to renewable electricity in developing economies is a slow process due to the economics of consumption. Therefore, the consumer uptake remains low for green energy marketers in developing economies. This chapter discusses a marketer’s perspective to examine the implementation of a green marketing program for a renewable electricity retailer. In this context, eco-innovations, adaptability of renewable energy, consumption economics, servitization perspectives, and public policies on sustainable energy distribution are discussed in this chapter. As the success of green marketing programs depends on the integration of consumer education, the green marketing programs in the developing economies need to carefully consider the financial subsidies on product and services, social stimulus, and energy production and retailing subsidies. In view of these marketing attributes, discussions in this chapter are also extended on planning and management of cleaner energy corporations emphasizing on functional and emotional values to simplify consumer decision-making processes. Conservation of natural resources and energy has been on the top of sustainable development goals agenda. However, some of the major challenge among consumers to adapt to green energy devises is consumer knowledge, social motivation, initial expenditure, and recurring maintenance. Diffusion of knowledge on using green energy among consumers is a collective responsibility of people within the community, which should © The Author(s) 2021 Rajagopal, Sustainable Businesses in Developing Economies, https://doi.org/10.1007/978-3-030-51681-9_4

103

104

RAJAGOPAL

be driven by the government and business firms besides the social organizations. Shifts in consumer behavior is a complex process, which needs to be stimulated not only with the organized efforts but also with the consumer consciousness that emerged through consumer indulgence in socioeconomic and environmental protection initiative of the individuals. Therefore, the acceptance of green energy is a socially motivated consumer consciousness. There is a need to develop social engagement of consumers beyond government regulations, which should be capable of driving willingness to use green energy and contribute to the well-being of the environment. Such consumption consciousness can be developed by enhancing the psycho-social cognitive ergonomics and consumers’ perceived value of green energy. Nonetheless, to assess the existing levels of consumers’ perceived value toward green energy, involvement of energy companies in educating consumers has emerged as an essential corporate social responsibility (Sangroya and Nayak 2020). Such efforts inculcate green perceived value among consumers as multidimensional motivations comprising functional value, social value, conditional value, and emotional value dimensions. Contemplating behavioral development based on the above discussed psycho-social cognitive model, pro-green energy programs, and mass messages drive consumers’ sense of responsibility to voluntarily adopt green energy without having to rely on financial incentives governed by the public policies. Among developing economies, the green energy program for rural population applied by the Government of India can be cited as a popular people’s program. This program and the implementing organization have been named as Urjagram (Energy Village) aimed at providing renewable energy for domestic and agricultural purposes. This organization focuses on distribution of solar energy in the entire village ecosystem with zero greenhouse gas emissions, which can be harnessed using a variety of devices. With recent developments, under government community programs solar energy systems are made available for agricultural and domestic use with the added advantage of minimum maintenance. Use of solar energy is promoted as financially viable option with government tax incentives and rebates. The current architectural designs make provision for photovoltaic cells and necessary circuitry while making building plans. The National Solar Mission is a major initiative of the Government of India and the State Governments to promote ecologically sustainable growth while addressing India’s energy security challenge. It will also constitute a major contribution to the global effort by India to meet the

4

CLEANER ENERGY CONSUMPTION

105

challenges of climate change. Urjagram focuses on bringing affordable solar lighting to people across India. Solar lights rental models, selfhelp group (SHG) rental models, and setting up solar charging stations providing solar lights on a rental basis create livelihood opportunities for the entire villages (Neudoerffer et al. 2001). With the intensive involvement of SHGs, transformational consumerism in the green energy segment has been successful within the total target population. The Urjagram process include following linear process involving SHGs as a change agent: • Briefing about the solar products and its benefits • SHGs are set up for the solar-based livelihood projects • SHGs propose energy project for funding to the bank to process. The bank loan is aimed at buying the Solar LED lights or setting up small solar grids for predetermined domestic connections in the village • Bank processes the loan for Setting up of Village Solar Centre, and • SHGs provide lights to the villagers on rental basis In the background, Urjagram in association with SHGs delivers education to farmers through designed curriculum to enhance farm productivity, increase farm income by value addition, and promote conservation of resources. In addition, the Urjagram initiative also focuses in empowering women and educating them to improve their economic condition by organizing them into SHGs and arranging for skill development to facilitate income generation in the village. The “Energy Village” program of government of India is a vital example of power autonomy at the grassroots of the society. Excessive dependence on traditional energy sources is becoming complex today, while increasing dependency on renewable energy and fossil fuels is a zero-sum competition that demands initial business investment to lower the recurring consumption costs on energy. The impact of greenhouse gases, are serious to environment and adversely affect the neighborhood ecosystem, productivity, social reputation of the companies. By decentralizing power generation through renewable energy and biomass fuel technology the power distribution design will lead to integrate the power autonomy. This would reduce the risks of power generation, distribution, and generation by categorically developing energy portfolios of rural,

106

RAJAGOPAL

urban, and industrial energy markets. However, impending regulatory restrictions on renewable energy would help in creating more appealing products for customers that induce cost-effective consumption (Unruh 2010). The International Energy Association (IEA) has classified renewable energy into three different generations as discussed below (IEA 2019): • The first-generation energy technologies include hydro-power, wind, biomass combustion and geothermal energy, of which some hydropower and thermal power generation technology have held major share in power generation and distribution. • The second-generation technologies consist of experiencing growth in exploiting renewable energy sources, such as solar energy, wind power and some improved forms of bioenergy. • The third-generation technologies are in the early stages of advancement, such as concentrating commercial use of solar power, ocean energy, integrated bio-systems, and developing improved technologies for harnessing geothermal power. The principal strengths of energy production and distribution encompass geographical location, political stability, and regulations on renewable energy for proper enforcing of production and distribution of energy to masses. However, the socioeconomic complexities spread across the social needs, energy companies, and regulatory authorities due to bureaucratic procedures in securing licenses and the high initial cost of projects are some of the key weaknesses in this sector. There has been a considerable gap between the energy production, supplies, and consumption during the second decade of twenty-first century, which has triggered disruption in power supplies causing regular or abrupt power cuts in developing countries. On a macro perspective, the global report on emission greenhouse gases shows that energy-related emissions hit another historic high in 2018. The gap between expectations on renewable energy transitions and the production capacity of existing energy systems on fossil fuels remains wide. And the gap between the oil markets and geopolitical tensions and uncertainties have also gone high during the decade of 2020s (IEA 2019).

4

CLEANER ENERGY CONSUMPTION

107

Energy Business Modeling The low generation and distribution of renewable energy in developing countries indicates that the lack of diffusion of green technology innovation is causing major gap in social awareness, motivation, and consumption intentions. Energy intensity and green innovation techniques share a complicated political, economic, social, technological, environmental, and legal relationship. Consequently, the adaptation of green technologies needs to be pushed in the society through the organized efforts involving public–private–political partnership (4Ps) matrix. Among other developing countries, the renewable energy production and distribution has been prioritized in the sub-Saharan Africa, and companies are engaged in developing affordable technologies to lower the cost of consumption of renewable energy. Long-run relationship between the cost, time, risk, and returns in producing and distributing the renewal energy varies by region in reference to the government policies and the relationship among 4Ps Matrix. The consumption pattern of nonrenewable energy in developing countries is still obscure on the global map as people widely depend on the traditional power supplies (hydro and thermal) generated by the government and private companies. Since the contributions of renewable and nonrenewable energy on output are very close in sub-Saharan Africa, South-east Asia, and Latin America and Caribbean countries, country group and time period, the cost of industrial production is higher, resulting into slowing down the economic growth in the long term. Therefore, the policymakers in developing economies should increase their renewable energy investments and transform the energy consumption in industries irrespective of their size. Companies in industrial sectors should be given adequate training and directed to use renewable energy. In order to promote the green energy consumption globally and locally, energy enforcement regulation has been the need of the hour not only to conserve hydro and thermal energy productions, but also to ensure economic benefits. The cooperation between government and private sector partnership might boost investments in renewable energy (Vural 2020). The ecosystem of business modeling for energy production, distribution, and consumption is complex. The inner and peripheral ecosystems of energy business modeling is exhibited in Fig. 4.1. Business modeling for green energy marketing is complex, as multiple factors are involved in the ecosystem. Figure 4.1 illustrates the inner

Domesc

Resource Mapping

Scope of Energy Business

Investment and Returns

Green Energy Technologies and Business Modelling

Green Energy Consumpon

Sectoral Agriculture and Rural Industries

Inner Ecosystem

Distribuon and Quality

Peripheral Ecosystem

Fig. 4.1 Business modelling for green and renewable energy marketing

Social Needs Quality of Life

Innovaon and Technology

Cost, Time and Risk

Self Help Groups Public-Private Partnership Government Programs Internaonal Agencies

Polical Ideology Leadership Public Policies

Social and Economic Values

Customer Support

Legal Perspecves Reinforcement Social Evaluaon

Macro Strategies for Geo-demographic Distribuon of Renewable Energy based on Solar, Fossil, and Wind sources

MSMEs Large Industries

Consumer Educaon

Energy Pricing Promoon

Energy Clusters Energy Infrastructure Energy Pooling

108 RAJAGOPAL

4

CLEANER ENERGY CONSUMPTION

109

ecosystem and peripheral ecosystem that affect the business modeling for green energy products. The green energy consumption has high potential in the domestic and sectoral production including agricultural and rural industries, and small and large industries. The inner ecosystem that affects the business modeling of renewable energy products focuses on exploring new opportunities for expanding to new markets by investing in high return green energy production projects. However, the cost of per unit production of energy, time taken to deliver the output, and risk associated in such projects need to be meticulously calculated. The major challenges in production and distribution of green energy are quality and solar energy products, which are used for domestic and sectoral production (agriculture and rural industries), serve as independent production units than using power from pooled resources. Such independent power generators might have maintenance problem, which are serviced by the companies that install the power units with individual customers. Furthermore, the pricing of renewable energy for both business-to-consumer and business-to-business segments is challenging pooling and distribution of energy is not often price-competitive as compared to the conventional hydro- or thermal energy supplies. The underlying challenges in the green energy segment are imparting consumer education, motivating consumers, and creating social and economic values in the long term. The peripheral ecosystem of green energy business has several elements principally comprising social needs and quality of life, innovation and technology, organizations, governance, energy planning, legal perspectives, and customer support as exhibited in Fig. 4.1. It is necessary for energy companies to identify the social needs and the existing quality of life to motivate consumers to use renewable and green energy. Accordingly, companies need to plan in investing appropriate technology to generate and supply energy at affordable prices. The governance of energy projects can be the responsibility of SHGs, Public–Private Partnership, government programs, or partnership with the international funding agencies. However, energy programs can be successfully designed, developed, and delivered with the consistent political ideology, leadership, and public policies that support financial and socioeconomic benefits. Designing renewable energy programs need to consider the following perspectives on generation and supply of energy: Developing energy clusters: Energy organizations would work on laying foundation of energy clusters for energy generation, grid-transfers, users

110

RAJAGOPAL

(household and industries), and demographics (urban, semi-urban, and rural). Energy Infrastructure: Based on the energy clusters, infrastructure for power generation through solar grid-tie systems, grid integration of wind farms (energy plants), fossil and biofuel plants, and the like can be developed. Energy Pooling: In most countries, companies generating renewable energy like solar and wind energy sell or share their power with the principal power grid controlled by the government. In Mexico solar and wind power generated by the private companies are contributed to the Federal Electricity Commission of Government of Mexico. This explains pooling and distribution of energy to macro or national power grid.

In addition, the legal reinforcement of renewable energy use for domestic and partial-industrial purposes would help in achieving sustainable development goals. However, continuous customer support is required for the quality power supply from the renewable power devices at individual households, power-grids, and industrial power units. The impact of innovations in green energy during the early twentyfirst century has been responsible for the decline in energy intensity. A study finds that 1% increase in green patenting activities will lead to a decline of 0.03% in energy intensity in that sector. The study concluded that the relationship is more sector-specific and its magnitude increases over time with the heterogeneity in the demand and distribution of green energy. The transfer of technology plays an important role, through diffusion and spillover, to reduce the emission of greenhouse gasses, and improve the overall supply of the energy for domestic purposes at the niche level (Wurlod and Noailly 2018). Energy intensity is measured by the quantity of energy required per unit output or activity, while the energy efficiency improves the level of service with reduced amounts of energy. Consequently, the consumption of less energy to produce a product reduces the intensity. There is a growing consensus among the energy technologists about economic modeling of energy business in the context of climate change, biodiversity losses, and related resource depletion besides social and economic challenges such as attributes of social development, and income inequality. One of the objectives of energy business modeling is to explore the full potential of renewable energies to shift the economy toward a sustainable future and to adopt cost-effective

4

CLEANER ENERGY CONSUMPTION

111

technologies. Energy intensity, which can be defined as the quantity of energy used over the value of production, has declined over time in the developed world (Chakraborty and Mazzanti 2020). The use of fossil fuels to heat and power homes, and fuel the transport vehicle is gradually increasing in the developed societies where production of biofuels and maintenance of biofuel driven energy equipment are subsidized by the government. Often, energy needs are met by using coal, oil, and natural gas, though these resources are limited and will eventually run out of stock. In the context of safety and waste disposal problems, most developing countries will have challenges with their recycling for generating energy. However, energy needs tend to grow continuously in the global arena. Renewable energy, therefore, has emerged as clean or green alternative using the high-cost technologies for low-cost supplies. The generation of green energy is being subsidized in most of the developed countries. Most developing countries in Africa, South-east Asia, and Latin America and Caribbean have also developed policies on subsidizing the green energy, but these policies are not effectively implemented by the national and local governments. Burning fossil fuels emits greenhouse gases into the atmosphere, trapping the sun’s heat and contributing to global warming. Climate scientists generally agree that the Earth’s average temperature has risen in the past century. If this trend continues, scientists predict that sea levels will rise, and floods, heat waves, droughts, and other extreme weather conditions could occur more often. However, decrease in the consumption of green energy and its intensity of distribution is not uniform across countries. In the USA, the decrease was nearly 40%, which can be attributed to efficiency improvements in chemical and basic metal subsectors along with the adoption of low energy-intensive machinery across various subsectors. Another example is Finland, where the energy intensity in the manufacturing sector declined in the 2000–2016 time period due to the adoption of new efficiency techniques, including machinery in the paper industry, which accounts for 57% of total manufacturing energy consumption in 2016 (IEA 2019). Exploiting renewable energy sources, and production and consumption patterns with social impact constitute crucial issues in the economic and climate debate. The energy politics in developing countries is inextricably connected with the global sustainable development goals agenda. Based on the existing energy scenario models, energy production tends to move with zero carbon goals by 2050 leaping to a stepwise reduction in using fossil fuels and a simultaneous increase in renewable energy sources.

112

RAJAGOPAL

In lieu of fossil fuels, developing countries are encouraging the biomass and bio-energy as the resources for this type of energy is available with the farmers in abundance. After treating the biomass, developing countries like India, Kenya, Nigeria, Ghana, and Pakistan generate biogas as a source of domestic energy for the rural households. The National Biogas Program in Ethiopia forms a part of the multi-country Africa Biogas Partnership Programme (ABPP), which intends to support the market-driven installation of 18,000 high-quality biogas plants, to provide households with clean energy for cooking and lighting and to promote the use of bio-slurry as organic fertilizer. The Ethiopian Biogas Program1 has several collective attributes to generate low-cost energy for the agricultural households as described below: • Developing capacities of the Coordination Units in different aspects of program management, including in project management, quality management, and change management, • Developing and involving the private sector through development and implementation of national framework, • Providing business development services (BDS) for increased private sector participation (construction, appliances, spare parts) leading to increased effectiveness and competition, as well as regional associations, • Promotion of bio-slurry, particularly linking with specific crops and in developing quality standards on slurry management and utilization, and • Encouraging women in use of bio-slurry in agricultural and food security-related activities. Generation and use of alternate source of energy have not only lowered the dependency on conventional energy sources, but also increased the productivity in farm and nonfarm sector operating with the independent low-cost and uninterrupted power supplies. The alternate energy movement has led to the shift in energy production and consumption patterns, that have enhanced efficiency to mitigate climate change. A 1 The energy solutions in Ethiopia and other developing countries are managed by the SNV Netherlands-A development organization. SNV is engaged in developing and implementing sustainability programs on agriculture, energy, water, and sanitation in association with the local governments (www.snv.org).

4

CLEANER ENERGY CONSUMPTION

113

profound transformation process has taken place in the energy industry and among sources of electricity production in both developed and developing countries. The solar, wind, and biomass energy have been growing out of a small niche market to support the national electricity grids in most countries. The people’s action and policy support are jointly causing transformation of the demand for renewable energy, which is explained as the small and large private and public households in their role as energy and electricity users. However, the political challenge still remains in many developing countries to design cost-effective policies to shift the energy demand toward renewable energy sources and less energy use. There is no uniform pattern emerged on generating alternate sources of energy as the public policies driven by the political ideologies are largely based on the private collaborations and corporate preferences. Though acceleration of environmental problems places considerable pressure on individuals, governments, and policymakers despite the greenhouse gas emissions caused by fossil-based energy sources, they have been identified as clean energy sources. The solar, wind, and biomass energy yet remain as a strategic choice in the big emerging countries like India, China, Brazil, and South Africa. In an ideal world, public–private partnerships and the role of SHGs in implementing energy programs are effective not only in generation of alternative energy, but also in motivating diverse consumption domains and target groups. The social thrust in transforming the energy consumption patterns are robust, inexpensive, flexible, socially acceptable, and equitable, and have few unintended side effects such as unwelcome distributional or rebound effects (Reisch and Zhao 2017). The homogenous preference groups as green nudges can be identified as thrust targets to implement the alternate energy programs and promote environmentally friendly choices and behaviors. The green nudges can be promoted to serve as social change agents through collective mandates or significantly altering energy incentives for socioeconomic benefits. The most relevant strategies to manage renewable energy clusters and consumers are through self-help groups and social governance. The selfhelp groups are organized and streamlined to manage the deliverable through the following stages: Arming: Critical analysis of social needs and prioritization of energy requirement by social clusters. Learning about the sources of alternate energy and project management process for categorical geodemographic clusters.

114

RAJAGOPAL

Warming: Organizing stakeholder meetings and imparting education on alternate energy consumption. Preparing stakeholders to generate solar, wind, and biomass energy at the household level for household and farm and nonfarm consumption. Storming: Internal brainstorming activity to develop the right energy business model, implementation, and servitization strategy for renewable energy projects. Norming: Policy development for energy distribution, pricing, promotion, quality standards (performance), people (promoters, gatekeepers, and customer interface personnel). Strategies for motivating consumers through social media form the part of policy development. Funding and technology support also need to be discussed at the stage. Performing: Implementing energy projects with funding organizations, social agencies, local governance, and monitoring organization. Activities on developing project charter, scope-creep management, deliverables, and cost-time-risk-performance matrix to be carried out at this stage.

Generally, energy projects are based on localized demand for the renewable energy. The initial focus of energy projects is to collect stakeholder information and extend customer advocacy along with education campaigns. In developing and managing the rural alternate energy projects, choice architecture, and regulation remain comparatively less applied across countries causing the performance of energy generation and distribution (Mundaca et al. 2019). The political and policy moves toward renewable energy transitions are not clear for the social agencies and new companies to comply with the climate policy.

Innovation Adaptation Developing technology to serve the social needs is challenging as there remains some mismatch between the technology design and social adaptation. These attributes are visible also in the adaptation of sustainable innovations, consumption of green energy, and technologies for social sectors like health, education, transport, and housing. Consequently, successful energy generation and distribution companies develop their energy business modeling considering a design cube, which comprises design-tosociety, design-to-value, and design-to-market attributes. Design thinking facilitates new social technologies that encourages more productive social innovation including transitions in energy consumption. The design

4

CLEANER ENERGY CONSUMPTION

115

thinking is strategically valuable for dynamic capability building among stakeholders on adaptation to the green energy products. By overcoming psycho-social barriers in innovation processes, design thinking accelerates to sense new opportunities, overcoming cognitive biases and aligning stakeholder priorities, and transform the consumption behavior (Liedtka 2020). Growth of technology and its dynamic synchronization with the industry is converging fast, leading toward quick adaptations of global products. The globalization of customer requirements is resulting from the identification of worldwide customer segments of homogeneous preferences across the territorial boundaries. Business-to-consumers and Business-to-business markets are powered by the consumer demands from the global companies as they are perceived more value oriented and of added benefits. Innovation and technology played a pivotal role in opening the global avenues for the regional firms. The evolution of global marketing is also influenced by the shifts in the market behavior toward adaptation of innovations of products, services and consumer-related attributes as discussed below (Rajagopal 2014): • Growth in technology – Diffusion and Adaptation – Process innovation • Technology Push – New technologies – Value chain • Market Pull – Market requirement – Consumer preference Diffusion can be seen as the cumulative result of a series of corporate efforts in bringing the new or breakthrough technology to the social platforms and the consumers that weigh the incremental benefits of adopting a new technology against the costs of change and cognitive behavior. A successful diffusion of technology of products and services or process innovation of operations in a firm leads to sustainable adaptation and globalization of activities (Hall et al. 2010). Innovation and technology

116

RAJAGOPAL

driven globalization process creates higher value chain and market pull for the products and services as such evolution of markets is enveloped within the consumer preferences. Innovation in energy generation and management poses a dilemma for energy companies and social leaders from the point of view of their social costs and benefits. Innovation in the energy generation and supplies operates under limited sets of circumstances and involves just a small constellation of supporting behaviors exhibited by the stakeholders and entire society. The energy business model needs a social thinking and agile development approach to outreach the stakeholders and build social value. Some of the essential attributes of the energy management practices hold the underlying logic of social benefits and explores how shifts in the consumption behavior affects the social sustainability (Birkinshaw 2014). Markets today not only provide multiple goods and services to the customers, but also expose their behavior to the cross-cultural differences and innovations. The specialization of the production process has also brought such cultural changes by business penetrations in the low production skills regions across countries. The apparel from Asian countries like Indonesia and Korea, all types of consumer goods from China, electronics from Japan, and perfumery from France may be some good examples to explain the specialization and cross-cultural sharing of consumer behavior. Conducting business is a creative enterprise, and doing it out of one’s own country is more demanding. The industry structure varies dramatically across countries in the world, and a global enterprise requires strong adaptation behavior to strive against odds. In the international business, a company needs to best prepare itself to achieve competitive advantage in the marketplace. The international partnering in reference to production technology, co-branding, distribution, and retailing may bring high success to the companies of home country in increasing the market share in the region and augmenting the customer value for mutual benefit. Most green energy generation companies are revising their business models in accordance with the shifts in local economic scenarios, technology management skills, social value propositions, and regulatory requirements. Business model innovation in the green energy sector has emerged as a tool for enhancing social development and achieving sustainability goals in partnership with the public policies. The energy companies encourage stakeholder involvement by designing and managing green energy projects through their own resources, government funding, and crowdsourcing to augment financial and sustainability

4

CLEANER ENERGY CONSUMPTION

117

performance. Energy projects managed by SHGs and public sectors companies controlled by the government acquire technical and managerial skills to implement business models rapidly and successfully by exploring and creating mutual values. Cognitive dimensions (knowledge, emotions, and self-image congruence) and corporate resources (budgetary allocations, collaborative business models, stakeholders) are important determinants to achieve sustainable competitive advantage in design-to-society and design-to-market energy projects (Geissdoerfer et al. 2018). Using new technologies in sustainability-based energy programs is often difficult for companies, as there remains a wide gap between the diffusion and adaptation of technology under various social and cultural conditions. Technological advances toward green energy are incremental, and many companies find it difficult to update existing technology as it needs recurring investment on skills development related to technology. Innovation in energy business models help to align social and stakeholder benefits, and revenue stream management to leverage sustainable solutions (Rashid et al. 2013). The energy business models not only add societal and stakeholder values, but also help in exploring business diversification with sustainable growth. Biomass energy agencies aiming at industrial and community energy products have gained high growth and performance over time and have expanded geo-demographically with several co-creation opportunities in the big emerging markets and developed countries. Biomass driven business models in farming communities like in India and Africa have helped these communities to grow sustainable. Social media can be an extremely valuable means to create the stakeholder value by enriching consumer culture toward adaptation of innovative products and enhancing the scope of commercialization of project deliverables. However, managing stakeholder value through the social media is sensitive to misconceptions of communications about the new and untested innovations. The main reason why some social media initiatives fail to bring benefits to companies is because the initiatives are unable to create emotional capital to establish connection between stakeholders and the company. Marketing firms should develop strategic value chain for enhancing organizational capability for getting fast response to rapidly evolving market dynamics (Rajagopal 2016). Firms are required to employ economic value-added analysis and strategic value assessment such as customer preferences, the rate of change of underlying technology, and competitive position in the marketplace

118

RAJAGOPAL

(Fine et al. 2002). Most multinational firms are targeting bottom of the pyramid market segments to acquire higher market share in the mass market, and these firms are fostering to develop sustainable value chain by building local capacity through 4A’s comprising awareness, acceptance, adaptability, and affordability. Firms also invest in educating local market players and alliance partners, developing infrastructure, and providing basic community services. The large firms also create shared value opportunities by improving products and reorganizing market segments, redefining productivity in the value chain; and enabling local cluster development. The adaptation to innovation, technology, and green energy models is complex. The attributes to green energy system among consumers are exhibited in Fig. 4.2. Adapting innovations in a conservative social platform is a complex process. In a society with limited recourses, people generally adapt to the proven success tracks of activities, and resist in adapting to any change for long-term benefits. Shifting consumption pattern from the conventional practices of energy consumption to the green energy is a growing challenge in rural and semi-urban geo-demographics. There are various social, personal, and economic attributes comprising cost of energy, maintenance of energy generators, and quality of supplies that restrict the consumer behavior to adapt to innovation and technologies in green energy consumption. Besides the cognitive ergonomics that embeds knowledge, awareness, rationale, and self-referencing, the social interest motivates them to adapt to the renewal energy consumption for domestic and sectoral (farm and nonfarm) activities. There are six broad segments consisting of core features like information management, technology attributes, and technology push, while micro environment (society), macro environment (political ideology, market trend, and innovation) and the rationale of adaptation and applications constitute the peripheral segments as illustrated in Fig. 4.2. The Figure reveals that collective intelligence created through the social media helps in diffusion of technology and in increasing the outreach of information to potential consumers, which induces applied knowledge for using the green energy. The motivated consumers receive user training from the energy organization, which aims at developing skills to harness the green energy to its maximum potential. Technology attributes largely demonstrate the scope of business growth by combining the process innovation, ease of use, and perceived value from the utilitarian objectives. The social demonstration of use and benefits of green energy, pricing and promotions,

Technology Aributes Growth in technology Process innovaon Ease of use Ulity and perceived value

• • • • •

Adaptaon and Applicaons Socio-cultural effects Corporate social responsibility Social endorsement Economic benefits Social and polical leadership

Innovaon Adaptaon

Informaon Management • Diffusion of technology • Collecve intelligence • Skill development • Applied knowledge

• • • • • •

Technology Push Social demonstraon Experience sharing Pricing and promoon Public policies Compeveness Connuity and future plans

Polical ideology Market trend Connuous innovaon

CLEANER ENERGY CONSUMPTION

Fig. 4.2 Adaptation to green energy: attributes and effects

• • • •

Social environment Consumer community Leadership and governance

4

119

120

RAJAGOPAL

supporting public policies, and competitiveness of the product drive technology push factor. In addition, continuity of the green energy program and benefits of target customers develop positive attitude among the consumers, which encourages them to share their experience among the peers and all with the community. Sociocultural effects, leader endorsements, and visible economic benefit motivate adaptability of green energy consumption for domestic and industrial purposes. Most companies drive the green energy initiatives as a part of the corporate social responsibility encouraging public–private partnership to create high social impact and consumer value. The innovation products in electronics, health, telecommunication, engineering, automobiles, and other utility sectors are booming rapidly, consumers are regularly blitzed with thousands of marketing messages, television commercials, telephone solicitations, supermarket circulars, and Internet banner ads about the launch of new products in the market. However, still a lot of these messages fail to generate the desired response and develop purchase intentions in the target segments. It has been very difficult for companies to always uphold the consumer preferences largely because the growth of technology is faster than the rate of adaptation of the innovation products. As the technology changes, the innovative product turns obsolete faster and it becomes difficult for the companies to maintain the preferred products of consumers. Although marketing has always been a creative endeavor, adopting a scientific approach to it may actually make the innovation cost-effective. However, the major challenge for the companies is to target the right customers in the right markets while positioning the innovation. Experimental design in innovation project management techniques, which have long been applied in other fields, let consumers evaluate the impact of many stimuli by testing just a few of them. Marketing companies can test a few combinations of those attributes and analyze the implications of its new project design for augmenting its value of deliverables, revenues, and profitability (Almquist and Wyner 2001). Transformational societies and governments support social sustainable development, as public–private partnerships have shown efficiency in management of renewable energy and its consumption. Therefore, society, companies, and government as a triadic force always stood as drivers for shifts in consumption, sustainability challenges, energy complexity, and economic and social effects on technology adaptation. However, companies engaged in energy business need to be more

4

CLEANER ENERGY CONSUMPTION

121

proactive in balancing their drive with social equity and environmental protection, though the corporate social responsibility and social sustainability projects. Such corporate propensity not only discretely contributes to their profit, but also help in gaining social value to augment corporate reputation through implementing corporate social responsibility projects. Besides providing green energy for agricultural and industrial sectors, achieving sustainable development goals for companies depends also on bolstering the performance of consumer education and energy maintenance services in developing countries. The level of economic development; openness to services trade, and social investment are positively related to financial, information communication technology, and transport services. Appropriate convergence of the macro development factor with micro indicators (stakeholder behavior) in services sector also contributes in achieving the sustainable development goals. Reducing the conservative behavior of society and stakeholders toward adapting to renewable energy consumption is negatively correlated with indicators of sustainable development goals. However, adaptation to renewal energy at wider social strata has received mixed reactions in the sociopolitical forums due to the latent barriers and delayed benefits. Transitions of innovative products to new designs or work platforms are challenging. It is commonly believed that the success of the projects with new designs largely depends on the skills and strategies that have been drawn from the previous experience on project planning, execution, and commercialization of deliverables. However, it is not always true, and the project team members moving into handling new tasks must gain a deep understanding of the situation at hand and adapt to it considering the factors that prompted the need for turnaround, accelerated growth, realignment, and sustainability (STARS). This model outlines the challenges of launching an innovation project with the objective of serving the market with competitive differentiation and driving rapid adaptation of the innovative deliverables. New project designs need to be developed from the perspective of value enhancement more than the cost-effectiveness and reenergizing the potential commercialization strategies for the innovative deliverables. One of the safest ways for the project managers to implement the new project designs is to follow the footsteps of a highly regarded leader with a strong legacy of success with similar or relational designs. The project managers can accelerate implementation of new project designs by assigning the new roles to the team members toward administering the project within the tasks-time-risk matrix. The

122

RAJAGOPAL

planning and management of new project designs demand the organizations not only to learn about the lean techniques of projects, but also to know deeply about the innovation commercialization process, consumer priorities, defining strategic intent, quickly building the leadership team, and creating supportive alliances among the company, market, and stakeholders. However, the way those principles should be applied depends very much on the business situation, and the STARS framework can help leaders analyze. Turnarounds and realignments present especially distinct project leadership challenges that call for particular transition strategies. Regardless of the business situation, project leaders should be able to identify the chain reactions at the end point deliveries such as a jump in market share or diversification into different markets to achieve the business goals (Watkins 2009). The S-curve pattern of technology and business growth also helps in managing the diffusion and adaptation of technology among the users. It is generally observed that diffusion of technology is faster than its adaptation among users due to resistance to change. A company can manage the pace of diffusion and adaptation of technology to gain advantage of technology for sustainable growth in business. However, it is difficult to predict the time span of each stage to know how the technology would move through these stages and become obsolete over a period of time. Large multinational companies in crisis often look back to resolve the situation by reviewing their previous strategies that contributed to their growth. Most managers learn from adaptation, aggregation and arbitrage during the process of expansion of their business activities to the global marketplace. Young managers learn to boost revenues and market share by maximizing their local relevance through adaptation while they attempt to deliver economies of scale by creating regional, or sometimes global, operations during the process of aggregation of their business. Firms often exploit disparities between national or regional markets by locating different parts of the supply chain in different places, working through the arbitrage. However, to make strategic choice firms require some degree of prioritization and they must focus to build competitive advantage (Ghemawat 2007). Emerging managers should also attempt to address the following issues while developing global framework for enterprise expansion: • Comprehension questions help understanding of the nature of the environment before addressing a consumer challenge.

4

CLEANER ENERGY CONSUMPTION

123

• Connection tasks stimulate thinking about the current situation in terms of similarities and differences with situations previously faced and solved. • Strategic tasks stimulate thoughts about which strategies are appropriate for solving the problem (and why) or pursuing the opportunity (and how). • Reflection tasks stimulate thinking about their understanding and feelings as they progress through the consumer process. • Adaptability drives managers who are able to increase cognitive adaptability have an improved ability to: – Adapt to new situations. – Be creative. – Communicate one’s reasoning behind a particular response. Organizational integration is increasingly essential to motivate social and consumer awareness about the energy consumption pattern. Cutting-edge companies are putting their efforts to meet challenges by integrating the organizational issues horizontally like subunit- or area-autonomy and centralized monitoring and control. The fundamental management challenges of the emerging and small enterprises are diversified activities, decision-making, and companywide cohesion. In the midtwentieth century, performance criteria were often ignored by the small firms. However, empowerment of managers in enhancing the production improved the unit competitiveness but deteriorated the organizational efforts in diffusing knowledge sharing within the firm. Consumer philosophy in twenty-first century has changed to decentralization of power to drive the business decisions faster. Managers today are responsible to help another employee to improve both individual and collective performance (Ghoshal and Gratton 2002).

Social Management Model The community creation model in managing renewable businesses projects across the downstream market comprising rural household and farm and nonfarm sectors functions more as social governance than a corporate venture. The governance mechanism for managing green energy projects in the rural areas lies between the hierarchy-based (closed) mechanism and the market-based (open) systems. However,

124

RAJAGOPAL

success of green energy projects in developing economies spreads faster across the social block-chains driving butterfly effect. Community-centric model shifts the focus of innovation and drives the change process beyond the boundaries of the firm, to a community of individuals and firms that collaborate to create joint intellectual property. Such strategies involve community in diffusing the change instituted by the company and set ground rules for participation, and developing sustainable consumer behavior with differentiation. Community creation model allows innovation-led changes to initially pass through a complex environment by striking a balance between order and chaos in the market (Sawhney and Prandelli 2000). Administrative complexities play a significant role in explaining new technology drive. Process simplification, zero defect products, cost and profit, and overall governance of new products development have many odds to be either eliminated or managed within the organizational system. Most SHGs do not setup innovation platforms foreseeing the odds and complexities or think about them during the process and give up the business process. Such behavior is significantly affected by the perception of administrative complexity. The technology marketing grid has several factors that pose conflicts and challenges to the innovation and technology development firms during different levels of the process. The complexity grid comprises twelve commonly observed points of conflicts, with independent effects of each point as well as in a matrix form. The conflict points in the grid include following factors: • • • • • • • • • • • •

Ideation, Resources management, Process management, Capabilities and competencies, Technology marketing, Growth and next generation innovation and technology issues, Involvement, Organizational policies, Operational efficiency, Competitive decision, Business environment, and Organizational culture

4

CLEANER ENERGY CONSUMPTION

125

The above factors nurture the innovation and technology development projects in the firm. In the complexity grid ideation process, the extent of involvement of employees, consumers, and market players stage cognitive and organizational conflicts and challenges. On the other hand, management of resources and organizational policies raise various challenging issues during different phases of innovation and technology development (Rajagopal 2016). Firms can synchronize the introduction of energy products in reference to the seasonal demand expansions, as they are more regular and predictable than those of the business cycle. Hence, demand fluctuations can explain more of the seasonal variability of new product introductions than that of the business cycle. Experienced energy generation and supplier companies are responsive to the business cycle market expansions, as the demand expansions at macro level are usually stronger and more persistent than the seasonal ones. Various factors including timing, infrastructure, quality of energy sources, and sociocultural strategies consumption of energy products contribute to the consumption behavior of green energy. Pricing is one of the major factors that affect the performance of green energy at a given time and market as it stimulates the upstream and downstream market demands (Calantone et al. 2002). Fluctuations in demand are attributed to diverse factors mainly consumer preferences, energy consumption areas (e.g., agriculture, home lighting, water heating, and irrigation) and distribution systems. Accordingly, the supply of solar, wind, and biomass energy should be priced and regulated. It has been observed that seasonality in energy requirement is reflected in one of the three main strategy manifestation - diversification of energy use, shifts in consumer preferences, and consumption intensity. There are three kinds of demand variability: structural (e.g., seasonality), managerial (e.g., promotions), and random (i.e., unpredictable), among the consumer food products that affect consumers´ perceptions, product attractiveness, and buying decisions.

References Almquist, E., & Wyner, G. (2001). Boost Your Marketing ROI with Experimental Design. Harvard Business Review, 79(9), 135–141. Birkinshaw, J. (2014). Beware the Next Big Thing. Harvard Business Review, 92(5), 50–57. Calantone, R. J., Cavusgil, S. T., & Zhao, Y. (2002). Learning Orientation, Firm Innovation Capability, and Firm Performance. Industrial Marketing Management, 31(6), 515–524.

126

RAJAGOPAL

Chakraborty, S. K., & Mazzanti, M. (2020). Energy Intensity and Green Energy Innovation: Checking Heterogeneous Country Effects in the OECD. Structural Change and Economic Dynamics, 52(2), 328–343. Fine, C. H., Vardan, R., Pethick, R., & El-Hout, J. (2002). Rapid-Response Capability in Value-Chain Design. Sloan Management Review, 43(2), 69–75. Geissdoerfer, M., Vladimirova, D., & Evans, S. (2018). Sustainable Business Model Innovation: A Review. Journal of Cleaner Production, 198, 401–416. Ghemawat, P. (2007). Managing Differences: The Central Challenge of Global Strategy. Harvard Business Review, 85(3), 59–68. Ghoshal, S., & Gratton, L. (2002). Integrating the Enterprise. MIT Sloan Management Review., 44(1), 31–38. Hall, J. K., Daneke, G. A., & Lenox, M. J. (2010). Sustainable Development and Entrepreneurship: Past Contributions and Future Directions. Journal of Business Venturing, 25(5), 439–448. IEA. (2019). International Energy Report-2019. Paris: International Energy Agency. Liedtka, J. M. (2020). Putting Technology in Its Place: Design Thinking’s Social Technology at Work. California Management Review, 62(2), 53–83. Mundaca, L., Sonnenschein, J., Steg, L., Höhne, N., & Ürge-Vorsatz, D. (2019). The Global Expansion of Climate Mitigation Policy Interventions, the Talanoa Dialogue and the Role of Behavioural Insights. Environmental Research Communications, 1(6), 1–14. Neudoerffer, R. C., Malhotra, P., & Venkata Ramana, P. (2001). Participatory Rural Energy Planning in India—A Policy Context. Energy Policy, 29(5), 371– 438. Rajagopal. (2014). Architecting Enterprise: Managing Innovation, Technology, and Global Competitiveness. Basingstoke, UK: Palgrave Macmillan. Rajagopal. (2016). Innovative Business Projects: Breaking Complexities, Building Performance (Vol. 2)-Financials, New Insights, and Project Sustainability. New York: Business Expert Press. Rashid, A., Asif, F. M. A., Krajnik, P., & Nicolescu, C. M. (2013). Resource Conservative Manufacturing: An Essential Change in Business and Technology Paradigm for Sustainable Manufacturing. Journal of Cleaner Production, 57, 166–177. Reisch, L. A., & Zhao, M. (2017). Behavioural Economics, Consumer Behaviour, and Consumer Policy: State of the Art. Behavioural Public Policy, 1(2), 190–206. Sangroya, D., & Nayak, J. K. (2020). Factors Influencing Buying Behavior of Green Energy Consumer. Journal of Cleaner Production, 151, 393–405. Sawhney, M., & Prandelli, E. (2000). Communities of Creation: Managing Distributed Innovation in Turbulent Markets. California Management Review, 42(4), 24–54.

4

CLEANER ENERGY CONSUMPTION

127

Unruh, G. C. (2010). Power Autonomy: Using the Biosphere’s Rules to Renew Your Company with Renewable Energy. Boston, MA: Harvard Business School Press. Vural, G. (2020). Renewable and Non-renewable Energy-Growth Nexus: A PANEL DATA Application for the Selected Sub-Saharan African Countries. Resources Policy, 65, 1–7. Watkins, M. D. (2009). Picking the Right Transition Strategy. Harvard Business Review, 87 (1), 46–53. Wurlod, J. D., & Noailly, J. (2018). The Impact of Green Innovation on Energy Intensity: An Empirical Analysis for 14 Industrial Sectors in OECD Countries. Energy Economics, 71(1), 47–61.

CHAPTER 5

Sustainable Logistics and Inventory Management

In the past few decades, circular economy concepts have been brought into the corporate focus. Reverse logistics plays an important role in the adoption and implementation of circular economy concepts in supply chains. This chapter discusses the various impediments in, and collective improvement on, sustainable logistics and inventory management in convergence with circular economy concepts. Specific development initiatives on emission control, shifts in transport economics, delivery technologies, green inventory management, and logistics modeling that supports sustainable logistics and inventory management, are discussed in this chapter. Discussions based on previous researches about the complexities of cost-time-risk grid management are also categorically presented in this chapter. The chapter also addresses the management basics of reverse logistics. There are challenges in various production and services sector management across the industrial sectors to develop appropriate programs for their sustainable growth. Services firms embed both tangible and intangible effects in delivering services to customers. For example, courier companies include packaging material as tangible products, which remain as intangible during a major part of their services. However, sustainability in overall services delivery remains a major challenge in these companies. Similarly, sustainability in surface transport, aviation, and shipping industries is a major concern and challenge as various factors affect managing

© The Author(s) 2021 Rajagopal, Sustainable Businesses in Developing Economies, https://doi.org/10.1007/978-3-030-51681-9_5

129

130

RAJAGOPAL

social, economic, and operations activities. In view of varied services portfolios and operations, it is difficult to provide an umbrella recommendation on how to make a workplace eco-friendly that fits all sizes of services companies. Nonetheless, most service companies conduct baseline assessments of current resource usage and waste production to implement sustainability strategies. Analyzing the data on their operations, waste generation, gaseous and particle emissions during operations, and recyclability opportunities, executives of eco-conscious services companies make collective decisions on how to prioritize sustainability projects within the organization. Companies engage public and stakeholders in sharing ideas on developing sustainable services through digital interface with them and motivate in generating new ideas, participate in planning sustainable projects, and governance of these projects. Services companies also tend to explore the possibilities of crowdsourcing and crowdfunding to implement sustainability projects through the public-private partnership. The service industries play a less significant role, in general, than manufacturing industries in reducing environmental impact. However, from the point of view of the transportation and logistics industries, the adoption of green initiatives by logistics service providers is taking on a pivotal role in supporting manufacturers and service providers working with strategies to achieve sustainability goals. Companies operating transportation and offering logistics services are putting efforts to reach cost-effective solutions on environmental issues since the global awareness on sustainability has laterally grown across the countries. Consequently, these transportation and logistics companies are becoming increasingly responsive to the increasing demand for the mobility of goods with high environmental protection by reducing the carbon emissions. Environmental sustainability has become an important criterion for firms to operate in the transportation and logistics service industry to seek various business benefits. The sustainability factors help in cost reduction through access to financial incentives, energy efficiency, tax benefits, and increased sales. The increasing customer demand for green services, improvement in customer relations, and customer engagement in sustainability program also motivate the transport and logistics companies to adapt to eco-innovations, achieve sustainability goals, and crate social values (van Hoek and Johnson 2010) Sustainability-based business modeling has become the new strategic direction for most services-oriented companies due to social and financial

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

131

benefits. Consequently, most companies are transforming their business models by adapting eco-innovations to lower the carbon emissions and support the social concerns on sustainability. Such development on sustainability-led business modeling has increased the competition among both manufacturing companies and service firms causing their social priorities to shift fast over the predetermined business goals. Manufacturers are facing the market challenges in the services industry by selling integrated solutions than carrying out the point-to-point services in the business-to-consumers and business-to-business customer segments. In the arena of sustainability driven business operations, multinational companies like Air France, KLM, CISCO, IBM, General Electric, and Rolls-Royce are competing aggressively, while the regional companies are playing defensive. However, the integrated solutions approach is delivering hybrid services ensuring the convergence of services products and total services. For example, integrated services of airline companies not only include the flying services but also accounts for the aviation infrastructure, services related consumable products, infrastructure, and quality of the aircrafts. Customers buy guaranteed solutions for trouble-free operations, therefore, deploying the right organizational capabilities should match customer needs (Davies et al. 2006). Despite social awareness and public policies on sustainable transportation and logistics services, most companies face growing challenges in managing green services due to size of the firm, industry attributes, infrastructure, and environmental uncertainty. Such contingencies in services are compounded with technical barriers comprising the challenges with the ease of use of technology and embedded complexities of green initiatives that often impose barriers on government regulations and standards. In addition, pricing of sustainable transportation and logistics services, initial investment costs, payback, operational costs, and quality of service pose threats in the industry of sustainable services. Absence of a longterm strategy also causes problems in this industry in reaching sustainable goals in a systematic way. The role of delivery and logistics in global companies has changed dramatically from that of simply delivery of goods and services to servitization of integrated set of management functions. This brings new challenges and opportunities in providing sustainable transportation and services. Short distance transportation and inventory needs such as establishing small destination-connecting hubs have increased as the large markets are fragmented and operating in niches. However, the increased

132

RAJAGOPAL

emphasis on specialization and fragmentation of low emission transport services in the urban, semi-urban, and rural destinations enhance the strategic operations through electric or commercial natural gas (CNG) driven cargo vehicles. Increasingly, the low and zero emission transport networks are being encouraged by the regulatory authorities in the developing countries. The decisions on sustainable transportation networks have become intertwined with conventional transport system in general. In managing sustainable transportation and inventory networks, the recurring transaction costs differentiate between the internal and external factors and affect the demand for these services. The sustainable transportation and inventory management decisions in urban and semi-urban areas have become challenging due to high congestion. The end-user price of sustainable vehicles is relatively higher than the nonecological vehicles, which has diminished the purchase intensions of consumers. However, in the countries that have subsidized the sales and road tax, consumers are leaning toward buying the light ecological cargo vehicles. In addition to traditional transaction costs, the structure of transport and logistics industries depends on the cultural and legal framework, government regulation, social preferences, environmental issues, political stability, and the risks involved in unethical business behavior. Consequently, this sector faces mixed-business prospects combined with economic risks and sustainability opportunities in various geo-demographic segments. Nonetheless, public-private partnership, government regulations, and redefining corporate goals are required to motivate consumer behavior toward sustainable transportation and logistics operations and gain critical management competence. Companies like Toyota, Nissan, and Renault that are engaged in the production and marketing of eco-transport vehicles have built integrated management strategies involving stakeholders, surface transport authorities, and social organizations to educate consumers and plan economic benefits of ecological vehicles, and long-term environmental protection. Accordingly, these companies work along with the social and political conventions to promote sustainability in the transport industry sector. Marketing of ecological vehicles, therefore, need to become more closely connected with the integrated management concerns using the reverse pyramid putting the social and sustainability goals as macro concerns, and corporate profit and business growth as micro factors in serving the transportation and logistics industry. Putting the social awareness first, therefore, should be the focus throughout the company to

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

133

develop sustainable transport networks. This broader view on sustainability perspectives represents a major extension of the concept of social products, social ownership, and social consumption in the transportation industry. It requires social governance supported by the public policies. In this conceptual framework, the automobile manufacturing companies and service providers participate as resource providers, which the society functions as large consumer segment in using the sustainable transport networks. Global sourcing creates many new opportunities for value creation, which well-run companies must learn to take advantage of (den Butter and Linse 2008).

Economics of Transportation and Logistics Economics of transportation and logistics sector has high variability in the reference to spatial and temporal conditions. The macroeconomic factors of sustainable transportation and logistics are associated with the social values, conventional practices, public policies, tax structure, demand and supply conditions, and scale of regional operations, which determine competition. The aggregate social wealth, awareness on sustainability, and social governance pattern also affect the macroeconomic conditions. The microeconomic factors in the transport and logistics services industries involve variables like macro factors, but the variability is confined to the niche. Consequently, the consumption behavior affected by the microeconomic factors is observed in a relatively smaller entities such as social neighborhoods and individuals. Transportation economics, is associated with certain unique issues such as (Khisty and Lall 2002): • The demand for transportation is derived from social, services, manufacturing and marketing sectors, which indicates that the transport and logistics sector demand should assessed in the context of the above sectors. • The consumption of transportation and logistics services is unique to time and space. • Technological factors differ according to the economies of scale of transportation and logistics services. • Regulatory policies differ according to regions and countries, which affect the sustainability goals in this service industry.

134

RAJAGOPAL

Transportation economics addresses demand of transportation services, supply of transportation facilities, elasticities of demand and supply, price mechanisms, and transportation cost analysis. Transport companies, which are adapted to achieving sustainable goals, are able to manage efficiently with the support of public policies. The physical assets management and operations of transportation and logistics services are associated with ISO 9001 for quality and ISO 14001 in reference to environment and sustainability. An ISO 9001 certificate demonstrates that organization is customer-focused and committed to deliver consistent, quality services. The ISO 9001 best-practice processes help to increase efficiency, drive continuous improvement and contribute to more efficient supply chains. ISO 14001 is the series of environmental management standards, which is developed for businesses looking to reduce their environmental impact. Transportation and logistics service industry, which is often criticized for the environmental effects, needs to acquire such international certification irrespective of size and territorial concerns. Maintaining quality standards and keeping the services in acceptable condition to achieve sustainability goals are the major challenges in small and medium size service providers. Companies with social governance and public-private partnership provide desirable levels of sustainable transport and logistics services with community or pooled financial resources. Given the ever increasing commercial and personal travel demands and limited resources, sustainable transportation has become more critical with small and medium companies. Managers of transportation facilities have become the agents of vast public asset, and are responsible to provide operational and financial accountability in delivering sustainable services. The management of transport and logistics services are the systematic processes of maintaining, upgrading, certifications, and operating physical assets cost-effectively. The transport management system combines engineering principles with effective business practices supported by the public policies, which is capable of building integrated approaches to decisionmaking involving triadic stakeholders-society, government, and transport companies (Canitez et al. 2019). Technology driven transport services attain long-term sustainable goals in developed countries. In these countries (Europe and USA), transport accounts for about 30% of emissions. The G-7 countries promote sustainable transportation, inventory management, and logistics to reduce greenhouse gases, which cause climate change. Technology adaptation

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

135

for sustainable transportation management is one of the emerging challenges to protect the environment. Among many the following sustainable technologies and management practices in transportation services include: • Use of bio fuels in some processes of manufacturing industries and transportation services • Biomethane obtained from the agricultural biomass waste for various operations in agricultural industry • Hydrogen obtained from plastic waste (Plasmix) as a source for use in industrial powerplants and controlled operations • Vehicle sharing and car pooling as participatory management to reduce the carbon emission and environmental protection • Use of commercial natural gas (CNG) and liquid natural gas (LNG) in light industrial and commercial vehicles, and • Electric vehicles for light industrial and commercial vehicles. Such trends, coupled with the increasing public-private investments, and socio-economic expectation on green transportation and logistics services with the advances in technology have piloted transportation systems in the context of circular economy and sustainability goals. Transportation demand analysis involves demand functions, which represents the willingness of consumers to purchase the transportation as a commodity at various alternative prices and promotions (e.g. Dawnay and Shah [2005]). Consequently, the demand-price curve, and demand-led business models would be able to estimate the market share by markets and category of transportation services. The demand and supply functions of transport economics have been discussed in the context of related variable in Fig. 5.1. The factors related to economics of transportation and logistics industry that affect the demand and supply functions are illustrated in the Fig. 5.1. Transportation demand functions, in general, enable the determination of expected demand at any price. A specific demand curve represents the demand-price relationship given a set of conditions specific to the transportation product in question (referred to as alternativespecific attributes, such as travel time, comfort, convenience), and also specific to the users (income levels and other socio-economic characteristics). Changes in such conditions often result in changes in the levels of transportation demand, even at fixed price of that product. However,

k1

Volume of Demand (k)

k2

D1

D2

D3

Demand-price relaonship Shis in consumpon paerns Preferences and frequency Cost-me-risk factors Revenue and profitability Market share , brand equity, and value Sustainability and consumpon behavior Geo-demographic aributes Compeon in the services market

p1 c1

p2 c2

• • • Price (p) • • • Cost of Supply (c) • • •

Economics of Transportaon and Logiscs Industry

Fig. 5.1 Demand and supply functions of transport economics

p2

p1

Price (p)

• • • • • • • • •

Shis in Demand Curve

S3 S2 S1 q2 Volume of Supply(q)

q1

Supply-price relaonship Supplier firms and compeon Public policies and regional transport Technology use in transport Sustainable supplies Societal values Cost-me-risk factors Revenue and profitability

Shis in Supply Curve

136 RAJAGOPAL

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

137

contextual to the price dynamics the consumption patterns shift overtime and influence frequency of buying services and embedded preferences of consumers. In such demand shifts, minimizing the cost, time, and risk appears as a major challenge among companies, which affects the revenue and long-term profitability. Demand for transport services stimulates both short-term and long-term market shares of companies and help in creating brand equity and social values. Besides several economic factors, geo-demographic attributes affect the transport economics and consumption behavior at the niche level. Generally, the demand curve followed in transportation and logistics industry is explained as a simple relationship with price and demand (p1 : k1 and p2 : k2 ). However, the supply curve is directly proportional to price, which indicates that volume or frequency of supply increases with high price/or services cost (p1 : q1 and p2 : q2 ) as explained in the Fig. 5.1. The stakeholders in pro-environmental societies are empowered to measure the performance of transport and logistics services from the SMART perspectives that constitute-social, marketability, adaptability, responsiveness, and thrust of public policies. Given the existing state of industry attractiveness, the transportation and logistics services exhibit the following attributes: • Change in demand of transportation services in response to social consciousness, • Change in demand is directly proportion to the market competition, pricing, and promotions, and • Change in demand occurs as public policies are enforced in the region. As the supplier firms observe the pro-price relationship, there emerges high competition among these firms across the regions. The regional transport authorities implement public policies in the developing countries to streamline the transport and logistics sector commitments to achieve the sustainability goals. However, low emission technologies are progressing at low pace with the rural transporters in most developing countries. Many low-carbon transport strategies are being pushed though the public policies and social institutions to achieve socio-economic and environmental objectives. These strategies are as listed below: • improving access to mobility

138

• • • • •

RAJAGOPAL

reducing traffic and parking congestion saving consumers money supporting economic development increasing public health and safety reducing air pollution by controlling particle and gaseous pollution.

Sustainable supplies in the transport sector poses threat to the small and medium firms due the intervening cost-time-risk factors in operations, which affects revenues and profitability in the long term. Supply of a transportation product represents the quantity of that product a producer is willing to offer at a given price. However, transportation supply may also be associated with the quality of the product. The supply curve illustrated in the Fig. 5.1 represents the supply-price relationship given a set of conditions specific to the transportation refers as quality attributes, technology adaptation, public policy and governmental intervention through policies and regulation. Changes in the supply curve in the urban, semi-urban, and rural areas affect the price-quality-consumption matrix. Increases in transportation supply may be traditionally increasing the fleet size capital-intensive investments. Planning for green transportation has emerged as a priority to reduce the environmental degradation and improve sustainability in the urban and semi-urban territories across the big emerging cities. Beside engineering the engines of commercial, cargo, and light transport vehicles; environmental engineering is also extended in cleaning atmospheric pollution through Nano technologies. Carbon Engineering, a company based in Calgary, Alberta, is commercializing a technology to capture carbon dioxide (CO2 ) from the atmosphere. The company plans to market the captured CO2 to produce low-carbon transportation fuels in markets. In some developed countries (like the state of California in the USA) sustainability regulation is designed to manage climate change by controlling the carbon emissions from transportation fuel (Lassiter and Misra 2013). In addition, General Electric Company (GE) is focusing on breakthrough innovation ideas toward sustainable transportation. Over time, the GE Transportation, a Wabtec Company (Subsidiary of GE), has launched a series of innovative green products ranging from the Evolution Locomotive to the Hybrid Locomotive. The sustainability development goals have become a global concern, and regulations across the developed and developing countries are aimed at reengineering the transportation and logistics services. Such goals have transformed the culture within GE Transportation, leading to a redefinition of the marketing role and new

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

139

decision-making processes to encourage innovation and manage risk of market demand and technology adaptation (Bartlett et al. 2007). The company focuses on reducing operating costs, decreasing fuel use, minimizing downtime, and complies with stringent emissions standards as discussed below: Increasing Fuel Efficiency: To reengineer transport and industrial vehicles that uses less fuel and perform with more fuel efficiency Delivering Locomotives: Axle Traction Control locomotives delivers AC individual-axle traction-control technology that enables greater hauling power by significantly reducing slippage on startups, inclines, and during suboptimal track conditions. Global Emission Standards: Company focuses on production of locomotives that decrease emissions and can help railroad customers avoid expenses in infrastructure and operational cost.

One of the major challenges of technology-led transportation services is the increase in the costs associated with continuous use in its maintenance. However, barring the cost factor, the benefits associated with the technology driven transportation results in increased transit demand, even if transit fares keep increasing due to economic factors. The supply of a transportation services represents the quantity of the product a producer is willing to offer at a given price. However, transportation supply may also be associated with the quality of the product. At a given time, transportation facility at higher price is an incentive for the service providers to make more profits, who therefore increase supply levels of transport services by category and region. Increases in transportation supply stimulates expansion of the fleet size of a transit company or building new roads or increasing the number of lanes for existing roads. However, such trend increases supply with more capital-intensive investments in the region over time (Manheim 1979). The use of intelligent (artificial intelligence) and hybrid transportation systems could lead to increase the transport fleet and supplies even for the rough road networks in remote territories. In the planning and evaluation of transportation systems, the potential investments are measured in terms of cost-time-risk factors, demand and supply interrelations, and pro-environment social-political concerns within the region. The effects of 4Cs comprising customer, communication, compatibility (with knowledge, skills, needs, and use value), and change management is often useful for the companies to analyze

140

RAJAGOPAL

the change proneness among stakeholders and community to manage transportation system by working out demand and supply of services. In view of the changing technology, demand, and value perceptions of customers for buying transport vehicles (personal, commercial, and industrial uses), and with isolated efforts to improve sustainability, companies encounter a long string of unanticipated consequences. The intervening factors spread across financial, social, or environmental costs. The small and medium transportation and logistics services firms in developing nations fail in complying the innovation and technology, and in achieving the sustainability goals as they respond in a fragmentary way. However, the pressure from customers, shareholders, boards, employees, governments, and social institutions builds pressure on these firms to adapt to cost-effective technology to reach out the sustainability norms. The stakeholders demand that suppliers change their materials to environmentally friendly or consider end-market requirements to reduce emissions from transportation. Consequently, in the developing economies the transportation and logistics service providers tweak their own operations by using compact fluorescent lamps, recycling more of their materials, tuning their vehicle engines periodically to lower the carbon emission. Therefore, a holistic approach to sustainability would help companies of various sizes to introduce broader structural changes, as listed below: • • • •

Reinventing processes Developing new kinds of relationships with business partners Strategic alliances with technology companies Promoting collaborations with government sustainability programs.

In developed countries, stakeholders increasingly hold transportation and logistics companies accountable for sustainable supply chain operations. The conscious consumption of these services indicate that sustainability is a competitive concern alongside the market competition (Lee 2010).

Regionalization of Transportation Services Urbanization today, is undergoing several new changes which raise concerns about the green consumption of energy, transportation services, and domestic appliances. The smart cities development is growing with these challenges, which demand more investment in technology projects

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

141

to support the ecological and infrastructure balance. Advancements in artificial intelligence and Internet of Things (IoT) have made it possible for cities to increase communication and management efficiencies across multiple services like public safety, transportation, water management, and even healthcare to help in converging technology with lifestyle. Nonetheless, investments in smart technology are deployed without robust testing, and cybersecurity is often compromised in this process, leaving city infrastructure that make principally the energy and transportation sectors vulnerable. Cyberattacks can affect multiple city services from a singleentry point, threatening public transport, health, and safety (Thibodeaux 2017). Fast growing urban areas and urban transport problems in developing cities call for major transformative reform attempts with focus on sustainability. However, it is important to institutionalize the concerns for environment and sustainability alongside the social consciousness. The public governance structure of transportation and logistics industry drives changes in the operations and sustainable institutional arrangements. Urban and semi-urban mobility systems are embedded within an institutional environment and comprise many socio-economic components, which determine the performance of transport services industry. Effective management and organization of urban transport systems require a holistic perspective, which not only considers the backward and forward linkages, but also describes their roles, interrelationships, conflicts, demands and motivations. A contextual approach, where each transport player is conceptualized with its role and function within the broader environment to address the urban transport issues and improve the existing system with a wholistic view. Urban transport systems not only comprise of public transport systems, but also include traffic management, services, and infrastructure, all of which ensure the satisfaction of citizens’ mobility demands. Sustainable transportation and logistics are services but they also involve manufacturing and construction processes respectively. Transportation sector has a wide manufacturing area of green vehicles for commercial, industrial, and personal use. On the other hand, the services of sustainable logistics sector depend on green construction, airconditioning, and environmental landscape. Most sustainable construction designs follow circular economy guidelines and build on recycled material to minimize the waste. Drivers of remanufacturing include the prolonged economic life of equipment and strategic opportunities. The

142

RAJAGOPAL

reverse logistics of remanufacturing includes transportation and storage, handling and packaging, sorting, and disassembly, which involves capabilities for inspection and sorting, knowing what to disassemble, feedback to designers, inventory control, and scheduling. After the remanufactured products are completed, they are introduced back into the operations channels and forward logistics. The complete process of sustainable transportation and logistics encompasses the tasks of creation of market awareness to target customers, pricing, guarantees, and warranties. Development of skills in reverse logistics is the need of the hour today to achieve the sustainable development goals (Ferrer and Whybark 2000). Marketplaces in urban demographic settings attract large number of buyers and sellers termed as market thickness. Coexistence of many shopping malls along with traditional markets in a marketplace causes market congestion. This problem may be resolved by developing small kiosks for transactions and allowing consumers to indent customized products and services from the base stores (Roth 2008). The growth of market share for specialized retailers and large departmental stores depends on the size of consumer segment in a given urban population. The process of suburbanization has gone beyond purely government-initiated relocation of households and the polluting industries in emerging markets like India, China, Brazil, and Mexico. In order to reduce the shopping area congestion, the new round of suburbanization has been driven by the development of large suburban shopping malls and retail parks (Feng et al. 2008). The sustainability strategy of transportation and logistics service industries is affected by various micro and macro factors as discussed below (Centobelli et al. 2017): Human factors: Quality of human resources, work culture and decisionmaking, change proneness, global awareness, and socio-cultural involvement in working for sustainability goals Risk factors: Organizational culture, public-private partnership, social and corporate leadership, company size, investment and returns risk, environmental uncertainty Technology factors: Cost of technology, technology compatibility, technology lifecycle, diffusion of knowledge, and adaptation of technology Relational factors: Customers’ awareness, social pressure on sustainability, supply chain dynamics, competition in the transportation and logistics services, brand equity and performance

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

143

Regulatory policy: Public policy on eco-transportation and logistics, regulatory pressure, political ideology, eco-innovations, governance and industry performance Market drivers: Competitiveness, marketing strategies, brand management, social marketing, sustainability-based business modeling, and Corporate posture: Corporate image, customer perceptions, proliferation, and profitability.

Socio-political approaches applied to the governance of urban transport and logistics services encourage human involvement to maximum limits and avoid mechanical interventions for improving sustainability. Services behavior, transport demand, cargo dynamics, and investment decisions are often explained by aggregating the supply chain behavior. The social and cultural resources interpret and analyze the dynamics involved in a system-wide transformation initiative to attain sustainability. Mumbaibased Dabbawala 1 organization achieves high service performance at par with the lean management and six sigma paradigm with a cost-effective simple operating system. The delivery system embodies mission, information management, material flows, human resource system, operations processes to meet the growing requirements, and challenges of homecooked food delivery. It is a sustainable way of delivery system. As the city grew, the demand for Dabba delivery grew too. The conventional coding system is still prominent in twenty-first century. Initially it was a simple color coding but now since Mumbai is a widely spread metro with 3 local train routes, coding has also evolved into alpha numeric characters. An outside consultant proposes the introduction of new technologies and management systems, while the leading logistics companies (e.g., FedEx) come to Mumbai to learn about the Dabbawala system (Thomke and Sinha 2010). Digital Dabbawala is an initiative to combine technology, e-initiatives of the state government. This organization has six sigma certification (Forbes Magazine) that engages over 5000 human resources working in Mumbai to deliver over 200,000 lunch boxes each day. The e-deliveries are managed by registering clients in the organizational system, which enables a delivery person (Dabbawala) to come with 1 In Mumbai, one of the largest cosmopolitan cities in South-east Asia, Dabbawala (lunch-box delivery person) is a conventional logistics and transportation system for delivering the food packs to the thousands of employees working in various organizations within the city. Dabbawala organization use bicycles, motorcycles, delivery vans, and public transport to deliver food packs.

144

RAJAGOPAL

a laptop and a biometric device, and register client’s agreement through the validation of social security card. The service begins after the registration is successful. This logistics and transportation organization has been ISO 9001:2000 certified by the Joint Accreditation System of Australia and New Zealand. The conventional social logistics system refers to the informal institutional elements such as culture, traditions, norms, social capital, trust, and customs. Such logistics organizations are formal institutions and operate under the urban transport systems. The contractual arrangements including procurement models underlining the role of risk and incentives between the transport and logistics players, which may jeopardize achieving the sustainability goals under non-comprising organizational work culture. Informal institutions, which mainly involve the norms, culture and traditions, are encourage by the socio-political leaders through behavioral incentives such as nudges designed into the social processes (Thaler and Sunstein 2008; Goulden et al. 2014). As the transport sector creates much environmental pressure, many public policies in the developing countries are aimed at meeting sustainable goals. However, due the implementation problems at the grassroots level, often small and medium logistics companies are not efficient in achieving the sustainability goals. Insights from behavioral economics can contribute to a better understanding of travel behavior and choices, and the impact of these on policies (Garcia-Sierra et al. 2015). The major problems associated with implementing the sustainable transportation program by the small and medium service firms as discussed below: Risk and uncertainty: Size of the firm, organizational design, infrastructure, and knowledge on environmental issues Technological factors: Complexity of technology, sustainability initiatives, transfer of technology, cost and technology lifecycle Public policies: Governance of public policies, regulations and standards, social responsiveness Market barriers: Product attractiveness, pricing pressure, people, performance, psychodynamics, and absence of a long-term strategy, and Financial factors: Investment costs, payback, quality of service, and crowdfunding and government financial programs.

Successful logistics modeling can provide effective competitive advantage provided the management of logistics programs deliver support the corporate decision. Embedding logistics into the business design would help in developing operating strategies on a continuing long-term basis.

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

145

Steps necessary for successful logistics modeling into strategy include the performance of a logistics strategy-audit, possible logistics systems redesign, and the maintenance of procedures to ensure continued attention to logistics as an integral part of corporate strategy (Heskett 1977). In the recent development, logistics alliances are becoming commonplace in business today, which involves sustainable operations to befit the company as well as gain social values. Multinational companies operate with logistics programs of their own or through their subsidiaries, which serve as a distributor or warehousing specialist. Encouraging the drive toward logistics alliances intensify sectoral competition forcing businesses to become low-cost competitors in order to keep prices down and maintain customer loyalty. Developing logistics alliance with external organizations and ensuring smooth-running operation is not easy (Bowersox 1990).

Eco-innovation Management Consumers today are sensitive to the innovation and technology that offer sustainable competitive differentiation and deliver competitive stakeholder value. Most companies follow a boom-bust cycle in managing their innovation for improving business performance in the competitive marketplace. As companies rethink their priorities analyzing the market demand, they try to deliver innovation-led products and bring competitive differentiation against the existing and potential threats. Sustainable innovation requires a new approach to manage innovation initiatives, and companies need to build capabilities on improving the innovation processes. A network of innovation intermediaries including independent innovators and start-up companies would be visualizing new opportunities from the market insights and technologies to provide solutions to several companies. Such ideas might never occur to companies while working on their own (Wolpert 2002). Innovations in the emerging markets are sprouting through the manifold growth of start-up enterprises that are sponsored by the large companies in various fields from consumer electronics to e-commerce and community health to sustainability of product and services. Innovations in the emerging markets are carried on in both business-to-consumer and business-to-business segments that are being nurtured by the sponsoring companies to facilitate the innovation to commercialize and gain quick returns on innovations. Small start-up entrepreneurs in the emerging

146

RAJAGOPAL

markets are working on the low-cost and sustainable innovations that delivers desirable results and enhance the perceived use value of the consumers. Accordingly, sustainable innovation is pacing fast in the emerging markets giving a major competitive challenge to the companies intending to penetrate high technology-high cost innovative product in the above marketplace. As the emerging markets are responding faster to the innovation and technology, the gap between premier-, and mass- or bottom-of-the-pyramid market segment is narrowing down. As a result, the global dynamics of innovation are changing. The sustainable innovation guides the managers of the sponsor companies about how to make innovation in emerging markets happen, and how such innovations can unlock opportunities in the global marketplace. Sustainable innovation has become a think-tank of innovative ideas in the emerging markets. Such trend poses immense challenges in the business community as it demands a company to overcome the institutionalized thinking that guides its actions toward managing innovative projects within the organization (Rajagopal 2016a). Multinational companies are leaning toward the logic of ecological innovation, in which products are first designed for consumers in lowincome countries and then adapted into disruptive offerings for developed economies. In this process, the emerging markets play as key drivers and serve as innovation routers. However, only a handful of companies have managed to do it successfully until now. Multinational companies, with capital-intensive innovation process that get the products developed through western designers following time-tested methods, struggle to overcome the constraints and leverage the consumerism of emerging markets. Managing reverse innovations for large companies hailing from developed countries appears to difficult in reference to matching the segments to existing products, lowering price by removing features, failing to think through all the technical requirements, neglecting stakeholders, and refusing to believe products created for low-income markets that could also have a global appeal. But companies can avoid these traps by defining the problems independently beyond innovation, reducing the overriding features in the innovative products and improving the functionality. To do so, the companies use best available solutions in the emerging markets that could help in lowering the prices, analyzing technological landscape that could fit into the requirements of the emerging markets, and analyzing the value perceptions of stakeholders.

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

147

Organizations often need to use business model innovations to capture value and drive managers to consider various scenarios to develop sustainable innovation and technology plan. However, firms may take all precautions to develop strategic business models while abandoning or undermining assumptions about the threat of market competition and risk. In the growing technology market scenario, emerging market companies will turn as significant competitors and thrive to enhance profit from new technology applications as they become available. Emerging markets will create plenty of opportunities related to smart technology, and will not be limited to for-profit enterprises. Innovation projects in most companies are based on the consumer preferences and the need for competitive differentiation. Accordingly, investments in innovative business projects follow a boom-bust cycle. The contemporary trend shows that the growing start-up enterprises at the bottom-of-the-pyramid of various geo-demographic segments keep analyzing the consumer needs and attempt on cocreating innovative products. These start-up enterprises set their priorities and explore sponsor companies to support research budgets to continue working on the business projects. Sustainable innovation requires a new approach with better initiatives to gain access to the insights and build capabilities for managing innovation alliance with large companies (Wolpert 2002). The backward linkages in the initiation stage of conceiving ecological innovation business project constitute crowdsourcing of ideas, understanding customer needs and preferences, determining the importance of the innovation, and evaluating the expectation of consumers upon implementing the innovation project successfully. The estimated cost of the innovation, its market potential for commercialization, and search for the right sponsor to undertake the innovation project are the major forward linkage tasks to initialize such projects. Upon seeking initial approval to the project by examining the various elements at the initiation stage, the innovative project enters into the real project management stage, which demand formation of project teams, training of the team members, developing project leadership, and analyzing challenges in the innovative business projects. These activities form the backward linkages, while setting project mission, goal, objectives, task management strategies constitute the forward linkages besides time and cost management and developing work breakdown structure. One of the most scientific method to monitor the progress of the innovative projects is considered to be

148

RAJAGOPAL

the stage-gate process that helps managers by assigning tasks in respective stages of the project management and reviewing them as the tasks are completed during the stage. Such project management approaches check the defects or gaps in task administration at each stage, and help managers in avoiding accumulation of defects at the end of the project, which is complex to sort and fix. The major challenges in the stage of commercialization of innovation are brand building through advertising and communication, and developing distribution, retailing, and services for the innovative products. Some innovations are conceived to serve the incipient demand, which needs creation of demand for the product. This appears to be more challenging than serving the innovation products to the existing demand. Companies need to invest substantial resources toward consumer education in order to create consumer demand. Besides, companies have to carry out product demonstrations such as ‘do-ityourself’ and adaptive customization by allowing the consumers to use the new products for a reasonable period to determine their value for money. However, the opportunities for open innovation, incremental innovation, and enhancement of the use value of innovative products over the product lifecycle stages finally take the innovation business projects to the initiation stage of the next generation innovative products.

Managing Innovation Projects Organizational perspective in innovation projects is usually cohesive with the project goals. The project team may find some latent objectives, tasks, and deliverables that might get aligned with the predetermined tasks of the project over time. Organizational rationale in budgeting helps the project team identify such latent expenditure points to plan for well in advance. This perspective of in-depth exploration over the costs also fosters a long-term view. System-based rationale in an organization employs a mixture of experience and insight in reference to the experience of the organization in a similar project in the past and new insights in creating the commercial success through sustainable branding. The overall knowledge developed through profound knowledge of real time prospects of the project deliverables in the market would help the project team to refine the budgetary provisions as well as allocate additional financial provisions for the post-project management of deliverables in the market. The systems perspective also guides the project team to develop

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

149

a sustainable business model for commercializing the innovative products emerging as project deliverables. The factors affecting management of innovation projects are illustrated in Fig. 5.2. Innovation, technology and sustainability (ITS) programs in transport sector are challenging to the firms, society, and government as there are various factors that affect the implementation of eco-innovations as exhibited in the Fig. 5.2. Firms working on the sustainability projects in the transportation and logistics sector should be able to develop a definite project charter to avoid scope creep (unplanned cost and extension of product completion schedule) and the influence of intervening cost-timerisk factors. Consequently, most small and medium firms in this service sector focus on frugal innovations. Nonetheless, large companies tend to acquire and commercialize successful reverse innovations, which are developed locally. For example, portable electro cardiogram (GE Mac 400) of General Electric Company which was developed in a social niche of India. Public policies encourage corporate social responsibilities that are carried out by the business firms, and public-private partnership to develop plans and implement energy policies and circular economy models. In addition, the social behavior supports the sustainability projects. Social behavior is built by attaining social needs through stakeholder governance and effective social governance. Sustainability projects lead to success by as social behavior is strengthened by perceived social beliefs, values, and community consciousness. Psycho-social behavior, which is supported by the stakeholder education and experience, emotions, and motivations, also contributes to the social behavior in general. The attributes of consumer behavior as illustrated in the Fig. 5.2 constitute cost to customer (low), communication (transparency), convenience (ease of use), conflicts (low in using sustainable products), compatibility (with expectation and needs), and change (leading to competitive advantage over the conventional products). These constituents determine consumption pattern of sustainable products from the utilitarian perspectives. However, positive customer advocacy toward sustainability projects in the transportation and logistics sector helps in developing consumer behavior in the long-term. Big projects are susceptible to failures as they often suffer from cost and time overrun causing lack of market competitiveness toward price, quality, services, and competitive advantage. The long-term, complex, and highbudget projects are developed by a series of teams working along parallel tracks by customizing their deliverables to the specific geo-demographic

Consumer Behavior

Innovaon skills Transfer of technology Pilot tesng and results Innovaon ecosystem

Innovaon Technology and Sustainability

Managing Eco-innovaon Projects

Fig. 5.2 Ecosystem of sustainable innovation projects

Consumpon paern Sustainable products Ulitarian percepons customer advocacy

Cost to customer Communicaon Convenience Conflicts Compability Change

Social Behavior

Psycho-social behavior Social movaon Emoons Educaon and experience

Social needs Social governance Stakeholder engagement Social beliefs and values Community consciousness

150 RAJAGOPAL

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

151

end-user segments. Innovating the CRM services upon completion of the project may face the jeopardy of educating consumers on the benefits of innovation, which could decline the performance of the project deliverables. The World Bank has used rapid-results initiatives with a great effect to keep a sweeping longitudinal project on track and deliver visible results years ahead of schedule (Matta and Ashkenas 2003). Large firms engaged in multidimensional business optimize their value chain activities and competition to leverage valuable capabilities and to acquire sustainable competitive advantage. Effectively performing value chain activities allows firms to develop capabilities to outmaneuver competitors and gain strategic advantage in enhancing their market share. However, value chain activities are not of equal significance to all firms due to varied specific goals. In order to understand the elements of the value chain, it is important to first understand the resources and abilities that create these underlying elements of the chain. The resource-based view of the firm indicates that firms can achieve sustainable competitive advantage by implementing value-creating strategies with their valuable, uncommon, inimitable, and non-substitutable resources (Prajogo et al. 2008). Most multinational firms are targeting bottom-of-the-pyramid market segments to acquire higher market share in the mass market, and these firms are fostering to develop sustainable value chain by building local capacity through 4A’s comprising awareness, acceptance, adaptability, and affordability. Firms also invest in educating local market players and alliance partners, developing infrastructure, and providing basic community services. The large firms also create shared value opportunities by improving products and reorganizing market segments, redefining productivity in the value chain, and enabling local cluster development. As discussed in the pre-text, large and emerging firms also aim at cocreation of products and business models to upgrade the shareholder value and enhance the value creation process. Innovation-led products turn sustainable as they gain desired market share and position themselves strategically in the market competition with long-term goals. Accordingly, both the consumer value and brand equity for the innovation-led products and services increase. However, as the technology grows and consumer preferences for the products change over time, the products turn obsolete depending on the lifecycle of the innovation, thereby depleting their market share and increasing the substitution risk. Hence, firms should be engaged in the continuous process of improvement or innovation to develop next generation products at

152

RAJAGOPAL

the edge of the mature stage and avoid falling into the decline stage. Products, which fall into the decline stage, are difficult to revive as the dynamic market forces weaken the product significance and turn them idle in the marketplace. The innovation project designs are driven customercentric to make new products aesthetically attractive and enhancing brand perception through strategic, measurable, adaptable, responsive, timely (SMART). Today, as customer-focused innovations are expanding manifold to encompass need-based and adaptive solutions, companies are asking innovation enterprises to create sustainable ideas rather than to simply redress the existing ones by making cosmetic changes. IDEO is a leading proponent of design thinking that believes in making innovations successful through meeting consumers’ needs and desires in a technologically feasible and strategically viable way with lean process. Developing new designs and managing them through lean project principles involve a collaboration between frontline employees to reengineer obsolete products and the associated insight by shifting the organizational paradigm to new innovation designs. Innovation enterprises should closely observe the changing consumer needs, market behavior, and technological trends to prompt new designs and rapid prototyping, developing new project layouts and business models, and help the organization in streamlining the market information across the project team, organization, and stakeholders (Rajagopal 2016b). In view of the fast-growing market competition, more and more companies are recognizing the business opportunities that focus on sustainability creates. Such shift in thinking in many companies and industries, where learning-organization principles are being applied to create sustainable business models, has evidenced change in organizational culture and improvement in the core competencies. Simultaneously, they become inspirational and energetic places to work, where even relationships with customers and suppliers improve. However, a more integrated view will enable companies to innovate for long-term profitability and sustainability. There are three core competencies that learning organizations must master to profit from sustainability including encourage systemic thinking, convene strategic market players and customers toward changing conventional thinking, and take the lead in reshaping economic, political, and societal forces that baffle change (Senge and Carstedt 2001). Technology-led innovations and business models can be successful provided they are user oriented. Agile use of technology, however, can

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

153

erode customer care. Firms must listen empathetically to the requirements of consumers to cater technology to the consumers, managers, and frontline employees. However, impulsive innovations targeted primarily at lowering the costs and increasing the use values have made many companies impervious to their customers. Such situation drives estrangement of employees from customers, and firms face difficulty in diffusing, launching, and serving the technology to the consumer segments. There are following innovation-led business models that help in driving the eco-innovations to the society (Sawhney and Prandelli 2000): • Community creation model, in managing new businesses across the diverse market segments, is a governance mechanism for managing innovation that lies between the hierarchy-based (closed) mechanism and the market-based (open) systems for new product management and driving butterfly effect. • Community-centric model shifts the focus of innovation, and drives the change process beyond the boundaries of the firm, to a community of individuals and firms that collaborate to create joint intellectual property. Such strategies involve community in spanning the change instituted by the company, setting ground rules for participation, and developing sustainable consumer behavior with differentiation. • Community of creation model allows innovation-led changes to initially pass through a complex environment by striking a balance between order and chaos in the market. A number of innovative companies have shown intricate relations between businesses and consumers they serve. Indeed, technology can actually enrich consumers provided firms uphold their commitment, involve empathetically with consumers, understand the ways in which current technology is valued by consumers, and co-promote the new technology and products through social networks and informal ways to help consumers in developing sustainable story-boards and inculcate trust on the firm and technology service providers (Gorry and Westbrook 2011).

154

RAJAGOPAL

Logistics and Inventory Planning The network design requirement is to determine the number and location of all types of facilities required to perform logistics work. It is also necessary to determine the inventory stock requirements in reference to demand and supply balance, and cost, at each facility. The operations plan of the companies to serve the overseas markets also work closely with the 3-T parameters, which include streamlining the time, target, and territory requirements to assign customer orders for shipment. The network of facilities forms a structure for performing logistical operations at the delivery hubs and outlets. Thus, the network plans incorporate information and transportation capabilities to process customer orders, maintain inventory, and improve material handling within the 3-T network design framework. Most companies try to develop operations and logistics plans in the overseas markets with minimum variance that involves maintaining the delivery commitments in reference to time and volume of merchandise. The managerial commitment in the logistics leads to the financial value of inventory deployed throughout the 3-T networking system. Turn velocity involves the rate of delivery of inventory over time. The high turn rates, coupled with inventory availability, indicates that assets devoted to inventory are being effectively utilized. Most companies aim at reducing inventory deployment to the lowest level consistent with customer service goals to achieve the lowest overall total logistics cost. Concepts like zero inventories have become increasingly popular as managers seek to reduce inventory deployment. The business process and logistics reengineering are followed by companies as a system enhancement approach to identify the operational defects that do not become apparent until inventories are reduced. While the goal of maintaining zero inventory is attractive and economical as most North American companies have adapted after the economic recession of 2007-1, adequate inventory facilitates companies to gain some benefits in a logistics system. Inventories can provide improved return on investment when they result in economies of scale in manufacturing or procurement. In addition to inventory management, forecasting and order management are two distinctive areas of logistics tasks that depend on chronological database of the company and dynamic market information. The logistics forecast is an effort to estimate future requirements, and it needs to be analyzed in reference to clusters and categories of products and services. The forecast guides the positioning of inventory to satisfy anticipated

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

155

customer requirements. Therefore, one of the main reasons the managers use information to achieve positive control of logistical operations is their desire to replace forecasting inaccuracy with faster response to customer requirements. Control concepts such as just-in-time, zero inventory, quick-response, and continuous-replenishment approaches allow positive logistical control that can be administered using various information technology platforms. In developing the logistics design, a fine balance must be maintained between transportation cost and quality of service. In some circumstances, low-cost and slow transportation will be satisfactory; while under different destination requirements, faster service may be essential to achieve operating goals. Developing and managing the desired transportation-mix depends on the 3-T matrix in reference to estimated costs and profit. The objective of operations and logistics planning is to make the product available to the consumers at a more convenient outlet. Distribution planning for products should be considered with prime importance to withstand the market competition, because, if a competitive product is available at approachable outlets or at low price, there are all chances of foregoing the sale. Therefore, to deal under such competitive market situation, a systematic planning is required for delivering the product to the consumers through different distribution channels. The time and distance factor for the delivery of goods normally influences the buying decisions where the manufacturing of products is subject to consumer order, occasional demands, and door-to-door delivery promises. In this regard, planning needs to be done evolving different methods for efficient product distribution through identified channels. In this process, there is a need to look into the infrastructure factors viz. transport, road, and communication in support of the channel efficiency. In fact, the consumer is only interested in getting the product, but a lot of responsibility lies with the marketing personnel in delivering the product at appropriate time and place (Rajagopal and Zlatev 2018). Inventory planning may invariably be based on the market survey carried out at the time of preparing the business plan. The distribution planning should be done to make the products available to larger number of consumers at lower marketing costs. To reduce the cost of marketing, it is required to determine the most feasible channel. Product characteristics and the operational area must be considered while selecting a distribution channel. In a different channel, distribution approach can be adopted to get the products more economically to the ultimate user. An important

156

RAJAGOPAL

factor to be assessed in this process is the cost effectiveness. It is observed that, the longer the chain of intermediaries in product distribution, the higher is the cost of marketing. Since cost is one of the determinants of profit, it should also be viewed from the angle of product distribution. The exclusive distribution approach is always confined to an area. Such distribution plan can be useful in the markets where the demand concentration for the product is low. In urban areas, where market competition for the product is high and the retailing is at large scale, selective distribution policy would be more useful. However, retailers and consumers in the areas, where the purchasing power of consumers is low but a large number of retailers are in business fray, feel the need for extensive distribution of products. In other words, such approach would help the market condition.

References Bartlett, C. A., Hall, B. J., & Bennett, N. (2007). GE’s Imagination Breakthroughs: The Evo Project. Boston, MA: Harvard Business School Press. Bowersox, D. J. (1990). Strategic Benefits of Logistics Alliances. Harvard Business Review, 68(4), 36–45. Centobelli, P., Cerchione, R., & Esposito, E. (2017). Environmental Sustainability in the Service Industry of Transportation and Logistics Service Providers: Systematic Literature Review and Research Directions. Transportation Research Part D: Transport and Environment, 53, 454–470. Canitez, F., Çelebi, D., & Beyazit, E. (2019). Establishing a Metropolitan Transport Authority in Istanbul: A New Institutional Economics Framework for Institutional Change in Urban Transport. Case Studies on Transport Policy, 7 (3), 562–573. Davies, A., Brady, T., & Hobday, M. (2006). Charting a Path Toward Integrated Solutions. MIT Sloan Management Review, 47 (3), 39–48. Dawnay, E., & Shah, H. (2005). Behavioural Economics: Seven Principles for Policy-Makers. London: New Economics Foundation (NEF). den Butter, F. A. G., & Linse, K. A. (2008). Rethinking Procurement in the Era of Globalization. MIT Sloan Management Review, 50(1), 76–80. Feng, J., Zhou, Y., & Wu, F. (2008). New Trends of Suburbanization in Beijing Since 1990: From Government-Led to Market-Oriented. Regional Studies: The Journal of the Regional Studies Association, 42(1), 83–99. Ferrer, G., & Whybark, D. C. (2000). From Garbage to Goods: Successful Remanufacturing Systems and Skills. Harvard Business Review, 43(6), 55–64.

5

SUSTAINABLE LOGISTICS AND INVENTORY MANAGEMENT

157

Garcia-Sierra, M., van den Bergh, J. C. G. M., & Miralles-Guasch, C. (2015). Behavioral Economics, Travel Behavior and Environmental-Transport Policy. Transportation Research Part D: Transport and Environment, 41, 288–305. Gorry, G. A., & Westbrook, R. A. (2011). Once More, with Feeling: Empathy and Technology in Customer Care. Business Horizons, 54(2), 125–134. Goulden, M., Ryley, T., & Dingwall, R. (2014). Beyond ‘Predict and Provide’: UK Transport, the Growth Paradigm and Climate Change. Transport Policy, 32(2), 139–147. Heskett, J. L. (1977). Logistics—Essential to Strategy. Harvard Business Review, 55(6), 85–95. Khisty, C. J., & Lall, B. K. (2002). Transportation Economics: An Introduction (3rd ed.). Upper Saddle River, NJ: Prentice Hall. Lassiter, J. B., & Misra, S. (2013). Carbon Engineering. Boston, MA: Harvard Business School Press. Lee, H. L. (2010). Don’t Tweak Your Supply Chain-Rethink It End to End. Harvard Business Review, 88(10), 62–69. Manheim, M. L. (1979). Fundamentals of Transportation Systems Analysis, Vol. 1: Basic Concepts. Cambridge, MA: MIT Press. Matta, N. F., & Ashkenas, R. N. (2003). Why Good Projects Fail Anyway. Harvard Business Review, 81(9), 109–114. Prajogo, D. I., McDermott, P., & Goh, M. (2008). Impact of Value Chain Activities on Quality and Innovation. International Journal of Operations & Production Management, 28(7), 615–635. Rajagopal. (2016a). Innovative Business Projects: Breaking Complexities, Building Performance (Vol. 1)—Fundamentals and Project Environment. New York: Business Expert Press. Rajagopal. (2016b). Innovative Business Projects: Breaking Complexities, Building Performance (Vol.2)—Financials, New Insights, and Project Sustainability. New York: Business Expert Press. Rajagopal, & Zlatev, V. (2018). Business Dynamics in North America: Analysis of Spatial and Temporal Trade Patterns. New York: Palgrave Macmillan. Roth, A. E. (2008). What Have We Learned From Market Design? The Economic Journal, 118(527), 285–310. Sawhney, M., & Prandelli, E. (2000). Communities of Creation: Managing Distributed Innovation in Turbulent Markets. California Management Review, 42(4), 24–54. Senge, P. M., & Carstedt, G. (2001). Innovating Our Way to Next Industrial Revolution. MIT Sloan Management Review, 42(2), 24–38. Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving Decisions About Health, Wealth and Happiness. New Haven: Yale University Press. Thibodeaux, T. (2017). Smart Cities Are Going to Be a Security Nightmare. Boston, MA: Harvard Business School Press.

158

RAJAGOPAL

Thomke, S., & Sinha, M. (2010). The Dabbawala System: On-Time Delivery, Every Time. Boston, MA: Harvard Business School Press. van Hoek, R. I., & Johnson, M. (2010). Sustainability and Energy Efficiency. Research Implication from an Academic Roundtable and Two Case Examples. International Journal of Physical Distribution and Logistics Management, 40(1–2), 148–158. Wolpert, J. D. (2002). Breaking Out of the Innovation Box. Harvard Business Review, 80(8), 77–84.

CHAPTER 6

Public Policies and Sustainable Business Governance

Adoption of sustainability policies and practices in organizations is a rising trend in public and private organizations. Transitionary perspectives on sustainability emphasize the need of the public sector to tailor policies toward technological innovation, and work on redesigning the public sector organizations. This chapter puts forth this argument in the context of global policies and local laws in the developing economies, and redesigning governance model for implementing sustainability policies. The public–private participation, and the community moves in the direction of developing sustainable business model are also discussed as core topics in this chapter. The chapter also highlights the factors that force the local civil governance system to realize that it is necessary to change the way they are operating in order to include the sustainability aspects within the operations of the local governance. Governing sustainability projects with adequate public policies and social empowerment has emerged as conscious efforts within the societal and corporate business environment. Social empowerment has been effective in developing countries through the transformative leadership and increasing awareness about the sustainability benefits among stakeholders. In addition, the engagement of business companies in implementing sustainability-led business models in the business-to-consumer and business-to-business market segments has motivated social governance at the local level. Sustainability programs in rural farm and non-farm sectors have contributed significantly in the process of social © The Author(s) 2021 Rajagopal, Sustainable Businesses in Developing Economies, https://doi.org/10.1007/978-3-030-51681-9_6

159

160

RAJAGOPAL

governance. The public policies administered by the social institutions get strong hold of implementation of social sustainability projects and educating stakeholders about the circular economy concepts.

Socio-Political Governance Communities and business organizations are collaborating on the three pillars of sustainability that include profit (include social leverages), people, and planet as an integrated framework for planning, implementing, measuring, and evaluating performance. In addition, large companies with scientific orientation to serve communities with sustainability projects often build their business models with the principles of Green Chemistry and Green Engineering (GC&GE). These principles offer a set of project designs to implement sustainability and creation of increased shareholder value. Moreover, transformative leaders in the society or business organizations pursue sustainable development to acquire social, economic, and technological values and develop new core competencies on sustainability literacy and systems thinking. This GC&GE approach helps in implementation of sustainable innovation and sustainable development across multiple scales in the urban, semiurban, and rural areas (Coish et al. 2018). For example, sustainability of urban-rural transit system has emerged as a joint responsibility of society, business organizations, and state regulators. Urban mass transit system exhibits varied commutation patterns for work, social activities, and economic linkages that affect the regional sustainability in various forms. Consequently, sustainable urban mass transit system needs to be monitored to measure the affects on sustainability and gains in social, economic, and environmental goals to balance the economic and ecological benefits. This can be attained through inclusive decision-making and cooperation governance of different stakeholders (Munira and Santoso 2017). Currently, economic globalization and rapid urbanization have brought local governance practices to manage the social and economic development of the global cities. Accordingly, the practice of managing environment, society, and governance (ESG) has emerged as an important dimension for developing and implementing sustainable strategies that affect the overall performance of business and society. The sustainability initiatives of public–private partnership encompass the policies, practices, and projects mandatory for the social products and services within the

6

PUBLIC POLICIES AND SUSTAINABLE BUSINESS GOVERNANCE

161

ecological programs. The governance of sustainable projects is successfully managed by the self-help groups (SHG) with community leadership, which are supported by the government funding programs. In developing countries, the apex refinancing banks arrange the funding of socially governed sustainable projects. National Bank for Agriculture and Rural Development (NABARD), an apex refinancing bank in India, encourages the commercial banks to consider the sectoral funding proposals of SHGs and non-governmental organizations (NGOs). Most SHGs, in association with the local governing authorities, encourage ESG practices to implement and manage the sustainability projects at the local level. Sustainability projects are designed with participatory research approach by understanding the needs of the stakeholders at the local level. These projects are aimed at reducing the negative impacts of environmentally ineffective industries within the region, and increase the positive benefits on ecology in all production sectors like agriculture, irrigation, silviculture, sericulture, pisciculture, apiculture, and renewable energy production. These projects are central to the stockholder welfare and socio-economic benefits within the niche. The sustainable projects promoted at the local settings are usually organized as: • • • • •

Internal, in-house projects Incubation projects for the pilot testing Crowdfunding and outsourced projects Public-private partnerships, and Alliances with the large companies as corporate social responsibilities

Participatory research appraisal (PRA) is a qualitative approach used to plan action research projects. This approach is based on community participation to document the knowledge and opinions of subjects in planning social and business development projects and programs. PRA engages the total population, irrespective of a defined sample size to develop concept maps and action research plans. Since PRA is a community-based research approach, it tends to eliminate the individual biases and validate the populist opinions. In this research approach, cognitive appraisal of the subjects is situational, and is shared across members of the community in the study area. Action research, therefore, leads to the developmental activities that are creative, productive and sustainable over a period. Action research evolves through Participatory Learning

162

RAJAGOPAL

Methods (PALM) to implement the suggested action plan (Rajagopal 2019). In the case of in-house sustainability initiatives, projects are designed, developed, implemented, and managed by social organizations (SHGs or NGOs), while the incubation projects are meticulously grown as social or business innovation projects related to sustainability needs. In the regions having high awareness about the sustainability needs and solutions, such projects are supported by public funding (crowdsourcing) through the angle investors or venture capitalists, who invest considering the costtime-risk and profitability propositions. The public–private partnership and alliance projects are directly involved in the planning, execution, and evaluation of actions, and are managed hierarchically within the firm with high level of administrative control. In such projects the financial incentives are low but the social consciousness and commitment of stakeholders on sustainability are high, which ensure performance of projects in the long run (e.g. Husted 2003). Positive impact of public governance based on the public policies on sustainable goods and services set the consumption behavior among the stakeholders. The social leadership and working group on the sustainable projects not only generate awareness on the eco-innovation and technologies, but also boost social motivation among the stakeholders to adapt to the ecological products and services. Thus, consumption behavior is a major component of welfare as the public understands it. The SHGs and NGOs in association with the government program implementors and corporate managers work with the stakeholders in the both business and social environment to explore needs, problems, means, and customized solutions for developing sustainable production and services. Such efforts can be explained as participatory social appraisal, which determines the needs, problems, and actions within the sustainability program. Commonly, the public may be aware that the broad benefits of sustainability may be able to fully describe their needs and problems. In the process of exploring sustainability needs and problems the following points affect socio-economic development of the region: • • • •

Health risks from transport emissions, Gaseous pollution and ozone depletion, Declining biodiversity from loss of habitat, and Social inequality associated with the adaptation of new technologies and production patterns.

6

PUBLIC POLICIES AND SUSTAINABLE BUSINESS GOVERNANCE

163

Exploring the above social perspectives is essential to plan, develop, and implement sustainable development programs at the grassroots of the social and industrial segments. This systematic pipeline visibility approach connects the economic, social, consumption, and environmental objectives in a balanced way. The long-term sustainability of social and economic growth, therefore, depends on implementing and maintaining basic ecosystem of sustainable products and services. Balancing these elements requires stronger cooperation with developing and transition countries, to disintegrate risks and explore opportunities to benefit from participation in a growing global economy. Hence the importance of taking a socio-economic view of sustainability projects entails a long-term impact to reach viable solutions. The key considerations for sustainable development are associated with 4S factors comprising systems thinking, social consciousness, social funding, and social benefits extent to which different types of capital can be substituted for each other. These factors establish nation-wide sustainable program to encourage operation and maintenance of farming, water conservation, and energy technologies, which create efficient implementation of the sustainable products and services with community participation. This process will have positive impact not only on the development of employment, but also on maintenance and operating costs in the sustainability of vital sectors. The agenda of sustainable development is both complex and broad. Hence, to begin with the sustainable development projects, sponsors (SHGs, NGOs, companies, and government organizations) often focus on some key areas that exhibit prime needs and where the risks of non-sustainability are highest. Such area constitutes irreversible depletion and degradation of a range of natural and environmental resources, which need comprehensive measures. Improving the coherence between economic and environmental diplomacy in the domestic and international arena would contribute to success of sustainability projects and help in removing inappropriate programs and projects that are not directly focusing on resource depletion and environmental degradation. The following measures describe the quick broad areas for action: • Estimating dynamic costs and price system to prepare realistic financial proposal on sustainable development projects that address environmental and social development

164

RAJAGOPAL

• Simplifying public policies and decision-making processes to reduce the bureaucratic tailback on planning and implementation of strategic sustainability projects • Allowing integrative approaches to develop multifunctional operational efficiency • Reducing negative consequences of public policies due to social and corporate coordination issues • Supporting fundraising organization and technological support to increase organizational performance of SHGs, NGOs, and public– private partnership • Working on the strategies to couple controlling environmental degradation and business growth, and • Strengthening the contribution of the international organizations and investment to improve the project systems of sustainable development. Convergence between economic growth and the sustainable development is central to the long-term development and socio-economic benefits. Economic growth contributes to higher levels of social well-being, and addresses a wide range of globally determined environmental objectives. Strategies of the firms that emerge out of market chaos help them grow their business in local markets and achieve sustainability and global competitiveness. Consequently, every small change resulting from the market chaos contributes to a global and sustainable effect in the market. While large and multinational firms have historically relied on technological know-how and reliable processes, they are planning to develop competencies in external relationships for sustainability in the competitive marketplace (Rajagopal 2015). High quality and high perceived value with high product differentiation enable companies to achieve sustainability in the marketing and deliver competitive advantage to the consumers over other products and services. In addition, high-quality product differentiation carrying high perceived value of consumers drives repeat buying behavior among consumers, which strengthens the sustainability and competitiveness of the products in the market. The salient elements of sustainable development policies are as discussed below: Long-term planning: Adequate framework is required for planning longterm sustainability projects. Resources, measures, and benefits form

6

PUBLIC POLICIES AND SUSTAINABLE BUSINESS GOVERNANCE

165

the framework for long-term projects targeted at the social and geodemographic segment. Though the trade-offs between different goals may be illustrative in the short term, sustainable projects will complement the non-ecological projects in a holistic way in the long term. Pricing Success of the sustainable outcomes depends on the total cost of the project and affordable pricing of the emerging products and services. The value for money broadly encourages the stakeholders to compare costs and benefits of the sustainable products and services. This may require the public policies to offer subsidies as incentives to overuse sustainable products and services to improve the environment. Delivery of public goods: State interventions in developing and delivering sustainable products promote sustainable consumption. The social products, which can be termed public goods comprise community housing, water and energy, public health, and sectoral manufacturing and marketing of economic goods. In a broader sense, the sustainability and ecological public goods are global as they benefit several countries and help in improving the state of global ecosystems. Effective delivery of these public goods requires public–private coordination, through sharing different responsibilities across destinations. Cost-effectiveness: Minimizing economic cost should be the focus of project managers of sustainable projects. The public policies advocate reducing recurring costs on sustainable projects though the initial investments might be high in operationalizing these projects. Costeffectiveness can be achieved by controlling the aggregate costs and the setting of more targets that could comply with the economy of scale in future. Environmental effectiveness: Sustainable advantage can be achieved by managing effectively the following factors: • Regeneration of renewable resources that are adaptable, used efficiently, and serve the long-term goals of natural regeneration. • Substitutability of nonrenewable resources should be planned with in the social communities and stakeholder are encouraged to use them efficiently. • Continuity of regeneration of renewable resources and ensure long-term economic benefits to the stakeholders. • Reduction of polluting substances in the environment and their concentrations should be kept below established critical levels necessary for the protection of human health and the environment. • Avoiding irreversibility to minimize the adverse effects of human activities on ecosystems and on bio-geochemical and hydrological cycles should be avoided.

166

RAJAGOPAL

Policy integration: Sectoral policies for sustainability in the agricultural and non-farm sector require social and economic integration to streamline the environmental policies to eliminate inconsistencies and high spillover effects in cost, time and risk factors. Improving policy coherence drives better integration of economic, environmental, and social goals across the sectors, industries, and geo-demographic segments. Precaution: Sustainability projects are successful if the thresholds are smaller as the cost-benefit and the span of delivering sustainable products and services will be certain and effective. Threats of exceeding critical thresholds in the regenerative capacity of the environment are subject to uncertainty. Therefore, governments of countries need to carefully examine the size of threshold of stakeholders to plan and implement the sustainability projects. Such parameters also help in managing the cost-effectiveness of sustainability projects. International cooperation: International diplomacy on environmental and sustainability perspectives often influences the public policy on planning and implementing sustainable development projects. With increasing international funding, spillovers of the sustainable projects have become questionable. Transparency and accountability: The participatory appraisal approach has emerged as a significant approach for sustainable development in the context of social and economic growth. The decision-making in sustainability projects demand for high transparency and accountability.

The concept of green infrastructure has moved today from architecture to manufacturing as a strategically planned network of natural and seminatural spaces in the manufacturing plants that embed environmental elements. The green infrastructure is an ergonomic way of improving the quality of lifestyle, social well-being, and social value streams, which are designed and managed to offer a wide range of ecosystem services in urban and semi-urban demographics, where reaching the natural resources is difficult. The green infrastructure network consists of a natural resource, which is a source of a wide variety of environmental goods and services that contributes to human development and wellbeing. The concept of green infrastructure holds new challenges of climate change, renewable energy supplies to the rural destinations in developing countries, and introducing cost-effective and user-friendly technologies to deliver sustainable benefits in farm and non-farm sectors.

6

PUBLIC POLICIES AND SUSTAINABLE BUSINESS GOVERNANCE

167

Business and Economic Perspectives The product differentiation carrying high perceived value of consumers drives repeat buying behavior among consumers, which strengthens the sustainability and competitiveness of the products in the market. High quality, high perceived value, and high product differentiation enable companies to become sustainable in the market and deliver competitive advantage to the consumers over other products and services. Most companies presume that the purpose of developing and implementing an effective marketing strategy is to drive the optimal profit and gain sustainability in the competitive marketplace. Companies that ignore this fact and follow rigid strategies blind themselves to unexpected complexities and miss potential opportunities. In order to gain a competitive edge in market chaos, companies need to learn how to adapt quickly in changing circumstances. One of the major challenges with the sustainable products and services is the high price. For example, in developing economies, consumers do not feel encouraged to buy solar panels for domestic lighting, and heating water and rooms in their house. It is assumed that the replacement of photovoltaic cells and the maintenance of solar energy converters are expensive. Large firms can offer product differentiations in their products and services against the products available in the local markets by ways of standardization, price competitiveness, convenience, and sustainability in the market. However, large companies need to develop an ethnic innovative perspective and a local business vision, prevent disruptive and counterfeiting products in local markets, develop partnerships and alliances at the destination market, and drive a supportive consumer ambience (Rajagopal 2015). Major structural shifts in the global economy are creating new opportunities in transaction banking, particularly in trade finance. International trade is growing faster than global GDP, and Asia is now the center of global expansion, driving trade growth in other emerging markets and in developed economies. The ongoing shift in global economic activity from developed to developing economies, accompanied by growth in the number of consumers in emerging markets, are the global developments that executives around the world view as most important for business and most positive for their own companies’ profits over the next five years. Executives also identify two other critical positive aspects of globalization: technologies that enable a free flow of information worldwide; and, increasingly, global labor markets. The global economy faces significant

168

RAJAGOPAL

challenges as it continues to integrate high levels of public debt in Europe and North America that are causing the fear of a negative impact on GDP growth. Emerging markets, with populations that are young and growing, will increasingly become not only the focus of rising consumption and production, but also major providers of capital, talent, and innovation. Over the trend of trade liberalization as experienced in the Latin American countries in the early decade (2001–2010) of the twenty-first century, the North-American Free Trade Agreement, has created a single market with the United States and Canada that has helped to propel Mexico into the top ranks of manufacturing exporters (Rajagopal and Zlatev 2018). Political ideologies have commonly been associated with particular social classes such as, liberalism with the middle classes, conservatism with the landed aristocracy, socialism with the working class and so forth. These ideas reflect the life experiences, interests and aspirations of a social class, and therefore help to foster a sense of belonging and solidarity. However, ideas and ideologies can also succeed in binding together the divergent groups and classes within a society. A unifying set of political ideas and values can develop naturally within a society. The values of elite groups such as political and military leaders, government officials, landowners or industrialists may diverge significantly from those of the masses. Ruling governments may use political ideas to contain opposition and restrict debate through a process of ideological manipulation (Heywood 2007). The problem today is the political aggression narrowing the business corridors on the plea of the achieving the political manifestos. Leaders often view politics as war, where victory is paramount, and compromise several social and business interests. Such ideologies often shift the business governance, such as from globalization to privatization on the political manifesto of making their countries great again (Moss 2012).

Business Diplomacy and Governance Business governance is an outgrowth of political ideology and public diplomacy. The nature of business and industry changes in the country or a trade block in context of political scenario in the countries that dominate international business. The political power dominates in trade negotiations and defines the contemporary trade philosophy for trade

6

PUBLIC POLICIES AND SUSTAINABLE BUSINESS GOVERNANCE

169

governance. The political framework of trade powers within their territorial boundaries influences key players in the economy comprising industries, governments, and non-government organizations exhibiting the supremacy of people in postulating the business strategy. This could help in designing domestic and international policies for major customers and suppliers, concluding acquisitions and alliances, and securing financing for business from investors and banks. The political ideology and public diplomacy drive the formation of industry coalitions with political bodies to influence policy makers, institutional shareholders, and key opinionleaders influencing the media and business analysts. Figure 6.1 illustrates various forms of sustainability governance as observed in developed and developing countries. The taxonomy of governance of sustainability projects is broadly spread across the government, social organizations, and corporate bodies over the various sector of production and services as exhibited in the Fig. 6.1. The norms of governance toward designing, development,

Public-Private Partnership Paral control by both bodies

Internaonal norms, SDGs, and evaluaons

Ownership of natural resources Federal laws Sectoral control Social governance Agriculture and SHGs, NGOs, Collecve Control allied sectors Policy of commons Local government regulaon-Local laws Public Policies on Sustainability

Social, Economic, and Human Development SDGs, Public Parcipaon, and Governance Fig. 6.1 Taxonomy of governance in sustainability projects

170

RAJAGOPAL

delivery (3Ds) are set by the government as the prime authority following the globally determined sustainability development goals (SDGs). The following section discusses regional variations of selective public policies and governance systems in Spain, Mexico, and Brazil. Many leaders exercise their public authority drawn within the political regime to influence executive decisions. But when leaders move into strategic positions, where directing business policies depends more on political influence and the ability to shift the current trends influence the routine operations. The political roles of business icons involve navigating within a business-politics matrix and drive external partners of the organizations to change the rules of business using the power of negotiation. Therefore, government agencies leading a critical support function for industry to shift their governance system and change controls in human resources management and information technology, control budgets, and learn to practice corporate diplomacy effectively. The shifts in political ideologies leverage organizational alliances, business networks, and other business relationships in tune to the political ideology (Watkins 2009). The socialist philosophy of business laid by Marxian principles have been critically viewed in globalization as a global marketing practice of serving the consumers at the bottom-of-the-pyramid to leverage their consumption pattern at par with the elite consumers. Business model innovation with focus on sustainability has the philosophy of giving more for fewer returns, unlike investing in business for profit. It is a featured concept of effective altruism adopted by companies to grow in the society. Corporate social responsibility has a latent sense of altruism, which is exhibited more apparently in the community than other socio-economic services projects. Altruistic trend in companies show prosocial goals regardless of whether reputational incentives or returns on social investment are present (Simpson and Willer 2008). Reciprocity is an underlying driver of social sustainability, which tends to bridge the gap between business and society. The principles of reciprocity build social sustainability by increasing trust and cooperation among people in the society, and stakeholders and employees of the company. From a different perspective, organizational and social sustainability are mutually reinforcing in the long run, and they stay discrete over time and space. Such connectivity between the sustainability concerns of society and business explains a complex relationship (Roca-Puig 2019). However, quick reciprocity in sustainability-based business models is a far cry.

6

PUBLIC POLICIES AND SUSTAINABLE BUSINESS GOVERNANCE

171

Business model innovation embedding sustainability projects broadly moves through four stages: conceptualization, determining key indicators, drafting business model innovation, and sustainable consumption. Sustainability projects are commonly long-term projects and need longitudinal evaluations. Therefore, adequate allocation of resources (capital, human resources, and technology) is one of the critical requirements in business model innovations. Though businesses are increasingly adopting sustainability, the environment continues to decline. One the most critical reasons of failure of sustainability projects is their inability to integrate micro- and macro-perspectives of sustainability. Corporate sustainability and environmental management can be determined as macro factors, while corporate social responsibility and sustainability development are micro aspects, as they are need based and involve community. Thus, corporate social responsibility and sustainability development should be addressed together by companies over and above a simple business case (Landrum 2018). Corporate consciousness on marketing of sustainable products has emerged in the early decade of twenty-first century by generating awareness among consumers. Such efforts have made a major impact on transforming the regional markets in setting vogue, cultural values, and social validity for multidimensional growth of companies. However-, the growing trends in consumption of eco-friendly, green, and organic products, due to social media effects and experiential marketing, have appeared to be strong catalytic elements in drifting consumer behavior. Growth of sustainability projects converging business-to-business, business-toconsumers, and consumer-to-consumer business models has been the most successful design of eco-friendly companies such as IKEA, Unilever, Panasonic, and IBM. However, some firms in a niche have also evolved organizational designs that signal a new way of resolving challenges within the sustainability-linked business models. For example, a South Korean organic food products company uncovers three consumption practices, which include investing in prolonged well-being, expressing sustainability values, and building self-esteem and social status among consumers. A critical examination of consumer behavior on sustainable products reveals that they are close to modern luxury fashion consumption (Chung et al. 2016). Marketing of environmentally sustainable product suffers from INVUCA, which comprises investment risks, new products and services management, market vulnerability, behavioral uncertainties of consumers,

172

RAJAGOPAL

decision complexities, and ambiguity in marketing strategies. Conventionally, companies have adapted themselves to sustainability-linked business models with a mindset of exploring opportunities to sell their products and services in the global markets. Such companies make cold calls on environmental issues; though they raise public or government funds for sustainable social development projects. However, most companies build their businesses by harnessing the best markets and consumer segments across geo-demographic territories with sharp external focus. Sustainable consumption pattern needed to support marketing strategies can be developed as an outgrowth of social innovation, involving non-governmental organizations in consumer education and production process. Companies intending to develop ‘design to sustainability’ business model can effectively create consumption ecosystems in the society. The consumption ecosystems guide companies to reinforce their business models in the existing and new markets through high corporate thrust and semiotics to enhance consumer outreach for sustainable products. Such backward linkage would help in building green supply chain, retaining, and consumption options. In order to make this process effective, governments propose economic policies on sustainable consumption and ecolabel certifications, help in creating consumer trust on sustainable products, and reinforce consumer preference toward their consumption. Following the above discussed process, companies can develop markets for sustainable products, and integrate marketing strategy into the business model innovation charter (Rajagopal 2020). Delays in developing appropriate strategy create instability in market dynamics and build negative feedback loops in the market, which reduces the sustainability of the company in the competitive marketplace. Hence, most firms have become increasingly complex and ungovernable, causing decline in performance, unclear accountability, and opaque decision process that raise questions on the sustainability of the firm. The sustainability of new products and associated technologies depends largely on organizational support toward employees’ creative production and marketing ideas, and innovative solutions to the consumer needs. Often innovation and differentiation project are unsuccessful due to the lack of organizational support to employees. It has been observed that supportive behavior from top management significantly increases the involvement of employees in new production, differentiation, and business initiatives. In most firms with sustainable development policies, operations managers are found less supportive when managing new products or differentiation

6

PUBLIC POLICIES AND SUSTAINABLE BUSINESS GOVERNANCE

173

issues as compared to managing other business issues due to perceived risk factors. Most companies explore ways to transform the various organizational practices used to enhance business sustainability. There are many significant ways that current management expectations and practices can be affected by growing societal and economic understanding about sustainability (Hopkins 2009), as given below: • Increasing productivity at the sustainably designed workplaces, • Developing sustainability-related business choices, • Building company’s sustainability profile for driving the organization’s overall management quality, • Improving innovation results to link with sustainability-related outcomes, • Developing sustainability efforts within an organization to drive productive collaboration, and • Inculcating transparency and trustworthiness among stakeholders to ensure competitive success Companies in emerging economies are largely known as environmental laggards but are being pushed on addressing environmental as well as consumer values. These companies observe that in markets where resource depletion is common, innovation and conservation of energy in products would be the value-added differentiation to gain competitive advantage. For example, LED television screens and computer screens have emerged as value-added differentiation in the existing product line besides offering value for money for consumers. Some of these enterprises pursue sustainability out of pragmatism, while some others do so out of idealism; but all companies generate sustainable growth rates and profit margins as long as they stay consumer centric and deliver desired values. Large companies intend to achieve the sustainable goals by taking a holistic view and investing in technology-led operating methods that could lead to lower costs and higher yields in business. Companies that have long-standing reputation in the market also follow bootstrapping by making small adjustments that generate big savings and drive sustainable butterfly effects in global marketplace. Companies that are successful in developing butterfly effects through small change models buy advanced technologies over the period, and extend their sustainability efforts to the

174

RAJAGOPAL

operations of their subsidiaries, customers, and suppliers. Companies that have long-standing reputation in the market also follow bootstrapping by making small adjustments that generate big savings and drive sustainable butterfly effects in global marketplace. Companies that are successful in developing butterfly effects through small change models buy advanced technologies over the period and extend their sustainability efforts to the operations of their subsidiaries, customers, and suppliers. Collectively, such companies demonstrate that no trade-off is needed between sustainability and financial performance and advocate strategies leading to sustainability as a powerful path to reinvention to standout in market competition. Du Pont delivers lessons that sustainable growth should be viewed not as a program for stepped-up environmental performance but as a comprehensive way of doing business, and as the one that delivers tremendous economic value and opens up new opportunities.

Public Policies on Sustainability by Regions Spain Water management has not been systematic across the farming communities in Spain until mid-1980s as there were no proper regulation at the local level. Before the reference year as stated above, which privatized the groundwater rights by allowing the ownership of water resources to the land owner. This situation in many cases has led to overexploitation of ground water and causing depletion of water level. The Water Law of 1985 radically changed this situation and established public policy on water conservation, utilization, and ownership through the updates on Hydrological Planning. However, users who extracted groundwater before 1986 were able to maintain their private water rights. The water harvesting and distribution services include water quality, water supply, drought mitigation, flood control, and coastal protection varies by region and sources. Therefore, the best solutions will not always be exclusively based on gray or green infrastructure effects. The water sustainability solutions may include appropriate hybrid solutions, which can produce better synergistic results than the application of solutions based exclusively on gray or green infrastructures. Nonetheless, the public administrations at micro-, meso-, and macro levels in the country have invested significantly in gray infrastructure in order to obtain sufficient water resources in terms of quantity and quality which correspond to different demands and uses (Caparrós-Martínez et al. 2020).

6

PUBLIC POLICIES AND SUSTAINABLE BUSINESS GOVERNANCE

175

Mexico Achieving green growth in Mexico needs more government funding and might require to develop more coherent taxation, energy, transport, and agriculture policies at the macro level. While assessing a holistic view of the green growth prospects in the country, it is observed that improving efficiency in state-run electricity and oil industries are the key areas that support the reduction targets of greenhouse gases emissions. The country spends as large sum on energy subsidies and being environmental tax revenues are low contributes indirectly to the gasoline and diesel subsidies in the domestic market. Recently the gasoline prices are linked to the dynamic market pricing approach; however, Mexico’s policy stood a long way on keeping gasoline prices constant in real terms and offering subsidies for household energy. These measures benefited affluent social groups, whereas direct social transfers have a greater impact on the poor. There has been a prolonged debate on the removal of subsidies that are not economically beneficial to the fiscal and monetary health of the country, and the gross domestic production. Nonetheless, the removal of environmentally harmful subsidies would promote more rational resource allocation across the economy and benefit the sustainability projects. A legal framework fostering private investment in environmentally friendly economic sectors also has the merit to help planning and implementation of sustainability projects at various geo-demographic levels in the country. Although, the country has a well-developed policy framework for water resource management, policy implementation has been observed in some country studies as uneven, institutional, financing, and governance perspectives. The stakeholder participation in water management financing and cost recovery for irrigation services needs to be strengthened through strategic financial plans combining public subsidies with endogenous finance raised from users. The integrated approach to water policies can be achieved through better policy coordination between water management agriculture, society, and different levels of government (OECD 2010). Brazil Brazil has instituted policies to narrow down the effects of deforestation under the Action Plan for the Prevention and Control of Deforestation in the Brazilian Amazon. The federal governance system has established

176

RAJAGOPAL

parameters to monitor and control environmental degradation in the Brazilian Amazon biome. Consequently, implementation of such regulations has promoted sustainable production, and to provide agrarian and territorial planning. In addition, voluntary agreements with meat traders have emphasized that they agreed not to buy meat produced in Brazilian Amazon lands deforested after 2008 (Saraiva et al. 2020). Several arguments over the years delineate that though deforestation is a serious environmental problem, it is not definite, as some deforested areas can eventually regenerate more sustainable production such as in agricultural sector and restore part of the original functions of the ecosystem through secondary vegetation growth. The regrowth of the secondary forest plays a complementary role to successful cattle raising in the Brazilian Amazon biome through the plans of intensification, pasture improvement and rotational grazing (Bogaerts et al. 2017). In addition, land tenure management and food production policies aim to guarantee sustainable farming practices by supporting practices to increase agricultural productivity while conserving and improving soil quality. The public policy in Brazil also establishes the concepts, principles and tools for the formulation of Family Farming and Rural Family Enterprises, which are commissioned in sustainability, and social and economic equity. In addition, the Bolsa Verde (green bag) program has been implemented in Brazil to stimulate the conservation of ecosystems (Berchin et al. 2019).

References Berchin, I. I., Nunes, N. A., Silva de Amorim, W., Zimmer, G. A. A., Rodrigues da Silva, F., Fornasari, V. H., et al. (2019). The Contributions of Public Policies for Strengthening Family Farming and Increasing Food Security: The Case of Brazil. Land Use Policy, 82, 573–584. Bogaerts, M., Cirhigiri, L., Robinson, I., Rodkin, M., Hajjar, R., Costa, C. Jr., Newton, P. (2017). Climate Change Mitigation Through Intensified Pasture Management: Estimating Greenhouse Gas Emissions on Cattle Farms in the Brazilian Amazon. Journal of Cleaner Production, 162, 1539–1550. Caparrós-Martínez, J. L., Rueda-Lópe, N., Milán-García, J., & Valenciano, J. (2020). Public Policies for Sustainability and Water Security: The Case of Almeria (Spain). Global Ecology and Conservation, 23, 1–17. Chung, H. K., Yang, H. J., Shin, D., & Chung, K. R. (2016). Aesthetics of Korean Foods: The Symbol of Korean Culture. Journal of Ethnic Foods, 3(3), 178–188.

6

PUBLIC POLICIES AND SUSTAINABLE BUSINESS GOVERNANCE

177

Coish, P., McGovern, E., Zimmerman, J. B., and Anastas, P. T. (2018). The Value-Adding Connections Between the Management of Eco-innovation and the Principles of Green Chemistry and Green Engineering (B. Török, T. Dransfield, & G. Chemistry, Eds.) (pp. 981–998). Amsterdam: Elsevier. Heywood, A. (2007). Political Ideologies: An Introduction. 4th Revised edition, Basignstoke, UK: Palgrave Macmillan. Hopkins, M. S. (2009). 8 Reasons Sustainability Will Change Management. MIT Sloan Management Review, 51(1), 27–30. Husted, B. W. (2003). Governance Choices for Corporate Social Responsibility: To Contribute, Collaborate or Internalize? Long Range Planning, 36(5), 481– 498. Husted, B. W., & Milton de Sousa-Filho, J. (2017). The Impact of Sustainability Governance, Country Stakeholder Orientation, and Country Risk on Environmental, Social, and Governance Performance. Journal of Cleaner Production, 155(Part 2), 93–102. Landrum, N. E. (2018). Stages of Corporate Sustainability: Integrating the Strong Sustainability Worldview. Organization & Environment, 31(4), 287– 313. Munira, S., & Santoso, D. S. (2017). Examining Public Perception Over Outcome Indicators of Sustainable Urban Transport in Dhaka City. Case Studies in Transportation Policy, 5, 169–178. OECD. (2010). OECD Perspectives: Mexico Key Policies for Sustainable Development. Paris: Organization for Economic Cooperation and Development. Saraiva, M. B., Ferreira, M. D. P., Antônio da Cunha, D., Daniel, L. P., Homma, A. K. O., & Pires, G. F. (2020). Forest Regeneration in the Brazilian Amazon: Public Policies and Economic Conditions. Journal of Cleaner Production, 269, 1–11. https://doi.org/10.1016/j.jclepro.2020.122424. Moss, D. A. (2012). Fixing What’s Wrong with U.S. Politics. Harvard Business Review, 90(3), 134–139. Rajagopal. (2015). Butterfly Effect in Competitive Markets: Driving Small Change for Larger Differences. Basingstoke, UK: Palgrave Macmillan. Rajagopal. (2019). Qualitative Marketing Research: Understanding How Behavioral Complexities Drive Marketing Strategies. New York: Business Expert Press. Rajagopal. (2020). Barriers and Benefits Towards Sustainability Driven Business Models. In S. Hashmi & I. A. Choudhury (Eds.), Encyclopaedia of Renewable and Sustainable Materials (Vol. 5, pp. 318–327). Oxford: Elsevier. Rajagopal, & Behl, R. (2018). Business Governance and Society: Analyzing Shifts, Conflicts, and Challenges. New York: Palgrave Macmillan. Rajagopal, & Zlatev, V. (2018). Business Dynamics in North America: Analysis of Spatial and Temporal Trade Patterns. New York: Palgrave Macmillan.

178

RAJAGOPAL

Roca-Puig, V. (2019). The Circular Path of Social Sustainability: An Empirical Analysis. Journal of Cleaner Production, 212, 916–924. Simpson, B., & Willer, R. (2008). Altruism and Indirect Reciprocity: The Interaction of Person and Situation in Prosocial Behavior. Social Psychology Quarterly, 71(1), 37–52. Watkins, M. D. (2009). The Corporate Diplomacy Challenge: A Leader’s Guide to Navigating this Important Career Transition. Boston, MA: Harvard Business School Press.

CHAPTER 7

Conscious Consumption and Marketing Strategy

Environmentally sustainable business practices and shifts in consumer behavior toward consumption and ecological footprints are becoming increasingly important for the consumer products manufacturing companies and retailing industry. Retailers contribute significantly in the global markets not only in promoting sustainable business practices, but also in shaping and modifying consumer behavior through consumer education. In view of the above developments on socio-economic and business management practices, this chapter focusses on mapping transformative consumption behavior, cognitive dimensions moderating consumer behavior, and the role of customer-centric marketing strategy. In addition, shifts in decision processes among consumers and socially conscious corporations, social and family factors affecting consumer preferences, and conformity factors on sustainable consumption are also discussed in this chapter. This chapter also reviews the research studies based on norm activation theory and the theory of planned behavior that argue new perspectives about the environmentally conscious consumption behavior. Consumption is a complex phenomenon as it is influenced by many psychosocial factors ranging from self-reference criteria to social stimulations. However, no definite line can be drawn to indicate the determination of consumption patterns. The consumption habit of green products and services may develop due to individual preferences, but can also be acquired in context of social motivation or government advocacy. Therefore, consumption is largely an individual and personal © The Author(s) 2021 Rajagopal, Sustainable Businesses in Developing Economies, https://doi.org/10.1007/978-3-030-51681-9_7

179

180

RAJAGOPAL

act based on selective needs, preferences, and perceived values. Most international firms have committed to develop sustainable products and services, and are engaged in developing the consumption behavior. However, consumption of these products depends on the price-qualityvalue relationship that determines the associated utilitarian values. And consumption of the services depends on the utilitarian values associated with them and the value of money. Consumption behavior is stimulated socially and also by the product attractiveness in the context of innovation and technology. In a broader perspective, underconsumption pulls down the marketability and business economy of sustainable products, while overconsumption can produce financial distress for individuals, or overuse and damage of natural resources and the environment. Consequently, consumption becomes a matter of social debate in conjunction with the business organizations. Consumers may increasingly choose to consume the sustainable products and services that they consider to be healthy and environmentally sound or otherwise socially valuable (Quelch and Jocz 2007).

Consumption Patterns Consumers commonly exhibit asymmetric behavior in searching, purchasing, evaluating, consuming, and arraying preferences for products and services. Thus, consumer behavior is a complex phenomenon, and completely understanding a consumer is critical for managers to efficiently implement the marketing strategies and customize products and services for customers to offer maximum value. Every element of the marketing plan and strategy is benefited by properly understanding the customer to manage the customer touchpoints competitively in the marketplace. Mapping the consumer behavior has become inevitable for companies in order to design markets in the rapidly changing consumer preferences today. Behavior is a set of socio-psychological indicators that cultivate a cognitive process in the human beings. It refers to the range of personality attributes exhibited by people, which are influenced by societal values, culture, attitudes, emotions, values, ethics, power, relationships, and persuasion. Behaviors in humans develop as learned, acquired, or shared process over the spatial and temporal factors. Similarly, consumerism is evolved in the society as a behavior influenced by the cultural, ethnic, economic, political, legal, and technological factors. However, consumer behavior is different for each consumer, and is generally motivated by the

7

CONSCIOUS CONSUMPTION AND MARKETING STRATEGY

181

social psychology and self-reference. The attributes of perceived values in consumption develops the consumer behavior over long time in a geo-demographic segment and a marketplace (Rajagopal 2019a). The cumulative effects of individual purchase decisions on sustainable products and services are responsible for social and anthropogenic perception. Innovative products with market-based and incentive-compatible mechanisms encourage the win-win buying behavior for green products and services. The availability of these products and their financial viability that ensure value for money propositions among consumers also encourage such behavior. Accordingly, people often overlook more efficient innovations and technologies with familiar antecedents. However, local policies and social leadership act as catalysts in providing profitable opportunities for business companies to increase the consumption and bridge the so-called efficiency gap (Amram and Kulatilaka 2009). Consequently, the customer behavior is a complex process, which is developed through a chain of cognitive stages stimulated by the psychosocial attributes. These factors include perception and attitude leading toward forming the behavior on sustainable products and services. Disruptive forces, low-cost technology products, and social marketing strategies drive consumption behavior and rapid shifts in the consumer experiences on the use of green products. Consumerism, therefore, is now shifting from emotional phenomena to materialistic attributes in making consumption decisions. In this context, companies need a fact-based analysis of the consumer behavior to monitor their perceptions and consumption experience. Consumers develop attitude and behavior in due course of time. The theory of behavior can be analyzed in the context of global markets. In addition to the socio-economic indicators, attributes corresponding to the changes in consumption patterns have occurred due to increase in convenience shopping, focus on wellness and green consumption. In demographic context, rapid shifts in the consumer behavior have also become noticeable as the growth among aging populations in developed markets is outpacing the growth in the number of younger consumers in emerging markets. However, elderly consumers are inclined toward learning the new consumption patterns of the millennials in the emerging markets (Rajagopal 2019a). The consumption behavior toward adapting to solar energy in developing countries is highly asymmetric as most consumers have not shown agreement with the use of technology, cost of devices, and the rationale of substituting the conventional energy sources. It has been observed that

182

RAJAGOPAL

consumers are largely driven be the cognitive approach which focuses on the beliefs-attitudes-intention linear path more profoundly than the economic approach for sustainable products. Therefore, the goal-directed theories have low impact on driving the behavioral dynamics on consumption of sustainable products and services. The utilitarian values explain the underlying behavioral factors in view of a given level of knowledge and awareness about renewable energy technologies (Reyes-Mercado and Rajagopal 2017). In the context of renewable energy products, the solar photovoltaics (PV) industry highly depend on the public policies to create social adaptability of sustainable energy products and motivate consumer behavior. Governments of both developed and developing countries have implemented policies to support consumption of solar energy, which has encouraged the production of solar PV products. However, the degree of influence of these policies vary across countries, time, and consumer economics. Consequently, the implementation of public policies on green energy contributes to regulatory uncertainties. Nonetheless, the fundamental question in developing consumer behavior for the products and services of solar PV industry remains unresolved as macro marketing strategies have failed due to the indifference in consumer attitudes. Although the public policies drive technological development and the locus of manufacturing of sustainable products, the consumption practices are very encouraging for these products in the developing countries. The firms’ decisions on location of business and technology development depends on the tax benefits and subsidies offered by the local governments in manufacturing and marketing of sustainability products as these products are largely price-competitive. Consequently, the businesses in sustainability products and services may result into low consumer turnout, low market share, low profit, and low market competitiveness for developed countries (Haley and Schuler 2011). The pattern of sustainable consumer behavior is a long-term process, which develops through various stages of psychosocial and economic value chain process as illustrated in Fig. 7.1. Developing the sustainable consumption behavior for sustainability products in the society is a complex process, which is broadly driven by personal, social, economic, public policy, and technological factors as exhibited in the Fig. 7.1. The behavior toward adaptation to the sustainable products and services is developed in the following five stages:

Commitment Strategic gains Trust

Percepon, Atude, and Behavior

• • • • • • • Advocacy Green goals Push

• • • • • • •

Social movement Community referrals Lessons and visions Internaonal push and pull SHGs and NGOs acon Government surveillance Corporate social responsibility

Referral Green Behavior

Social consciousness Government support Public-private partnership Stakeholder engagement Economic benefits Environmental values Self-actualizaon

Definive Green Behavior

Decision reviews Jusficaon Self-reference Opmizing output Social validaon Green leadership Environmental advocacy Extension educaon

Defensive Green Behavior

• • • • • • • •

Sustainable Consumpon Path

Needs Awareness Lifestyle

Investment Inclinaon to use Buying green products Economics and risk Perceived value Technology adaptaon

Lean Green Behavior

• • • • • •

Fig. 7.1 The process of developing sustainable consumption behavior

Movaon Benefits Values

Social awareness Public policies Peer movaon Stakeholder knowledge Experimentaon

Proacve Green Behavior

• • • • •

7 CONSCIOUS CONSUMPTION AND MARKETING STRATEGY

183

184

RAJAGOPAL

1. proactive behavior to green consumerism, 2. lean behavior by developing the intention to use green products, 3. staying defensing to the decisions on green consumerism, 4. exhibiting definitive behavior with social consciousness and selfactualization, 5. continuing as a strong referral for the green products and consumerism. The growing social awareness, peer motivation, and the experimentation about the green products and services ranging from renewable energy to the organic food products consumption help in generating proactive green behavior among consumers. In addition, public policy and stakeholder knowledge on green consumerism also play dynamic role in inculcating proactive behavior for green products and services. The interest of people in investing in, and their conformity to, the adaptability of sustainable energy, water conversation, green products and services, and health and housing projects establish lean behavior. This behavioral process is supported by the consumer’s perceived value emerging out of the economic benefits and risk analysis in using the technology-based sustainability product and services. The stage of behavioral process leads to the defensive behavioral stage by critical evaluation of needs, awareness, and their fit into the values and lifestyle. The following stage of defensive behavior drives consumers to justify their perceptions and attitude toward green decisions and optimize output. Most people at this stage seek social validation and reward for their decision to stay with the sustainable products, and tend to lead environmental advocacy and green leadership at niche and regional levels of society. However, as the social consciousness grows, the self-actualization on sustainability commitments increases. Further, the political ideologies, government support, and stakeholder engagement contributes to the definitive green behavior of people on sustainable products and services. Over the definitive state of behavior, most stakeholders enjoy the benefits of sustainable products and services and tend to push green goals as a social movement and stay as referrals to diffuse lessons and vision on the green consumerism in the society. Patterns of consumerism are changing in the society, as there are shifts in the consumer demography in the markets. The explosion of mass consumer segment, urbanization, and increase in the size of the population of aging consumers have contributed significantly to the shifts in consumer preferences and the overall consumption behavior.

7

CONSCIOUS CONSUMPTION AND MARKETING STRATEGY

185

Direct-to-customer marketing strategies, convenience shopping, and social media driven marketing approaches of companies have increased social and cultural influence on developing the consumer behavior. However, disruption in technology, and attraction toward local consumption also contribute in driving the consumer behavior dynamics across geo-demographic segments. Extended technology lifecycle builds positive consumer perceptions on higher value for money. Cocreation and codesigning approaches of customer-centric companies like IKEA has established business philosophy of connecting consumers and developing an emotion-based relationship with consumers as the key to leveraging loyalty and advocacy behavior. Motivation to buy, and adapt to, the sustainable products and services need extensive consumer education and social stimulus. Peer pressure, transformational leadership effects, and political push in the society toward sustainable consumption would help consumers in building positive perceptions, attitude, and behavior on green energy, sustainable irrigation, and organic products. Consumer perceptions are often agile, and need to be endorsed by the peers, friends, and family to support decisionmaking and to put them into practice over a long term. Such cognitive process creates consumption attitude among consumers. Perceptions linked to emotions are commonly impulsive and temporary, which do not make a dent on cognitive process continuity, and help in decision-making. The perceptions should be measurable. Consumers generally measure their perceived values in reference to the desired satisfaction in terms of value for money derived through the convergence of quality and price. The higher perceived value of consumers not only justifies the quality of the perceptual process among consumers, but also determines the social leadership by way of how many follow a right perception of a consumer as referral. Consumer behavior on green energy products in developing countries depends on the triadic motivation by the social organization, business corporations, and government. In this triad, the most resourceful entity is the business corporations, which can plan and implement joint programs with the governments on production and consumption of green products and services. Siemens, the multinational technology company, is engaged in meeting the sustainability challenges with a disruptive innovation. There are many new and developing technologies competing to discourage the fossil fuels and switch to wind, solar, and geothermal power technologies. Siemens Energy has focused in wind and solar energy,

186

RAJAGOPAL

although the time has come to choose which alternative it will focus on to disrupt the industry. This move to alternative energy represents an opportunity for developing perceptions on the social consumption (Rothaermel and Hoepfer 2012). Most consumers depend on the second opinion to validate their perceptions. Therefore, a social move to diffuse knowledge and educate consumers would improve the abilities of consumers to make decision on adapting to the sustainable products and services. Consumer perceptions are often agile and need to be endorsed by the peers, friends, and family to support decision-making and to put them into practice over a long term. Such cognitive process creates consumption attitude among consumers. Perceptions linked to emotions are commonly impulsive and temporary, which do not make a dent on cognitive process continuity, and help in decision-making. The perceptions should be measurable. Consumers generally measure their perceived values in reference to the desired satisfaction in terms of value for money derived through the convergence of quality and price. The higher perceived value of consumers not only justifies the quality of the perceptual process among consumers, but also determines the social leadership by way of how many follow a right perception of a consumer as referral (Rajagopal 2019a). As the consumer behavior is complex, the marketing of innovation products is also getting complex with the rapid increase in innovation and technology. Consequently, the challenge of marketing sustainable products and services are mounting on the companies, which often seek social empowerment process to drive consumers toward transforming their consumption behavior. The conservative behavior of consumers toward adaptation to the sustainable innovation and technology often drive companies to passively push innovations emerging from the competitive R&D or engineering minds. However, General Electric Company realized that it could no longer win simply by launching increasingly sophisticated technologies or taking existing technologies to new markets. To succeed, GE would need a social marketing engine that could collaborate directly with customers communities and lead to markets at the bottomof the pyramid. In marketing products that stimulate change behavior, marketing plays a vital operating function to drive organic growth with the customer communities (Comstock et al. 2010). To induce consumer perceptions on pro-sustainable products, companies managing innovative and technology products tend to develop functional strategies on the following marketing-mix elements:

7

CONSCIOUS CONSUMPTION AND MARKETING STRATEGY

187

• Product (attractiveness, utilitarian value, ease of use, common standards) • Price (subsidies, value for money) • Place (availability, delivery with service) • Promotion (value added benefits) • Psychodynamics (creating a common language, experience sharing, social reviews), • People (getting the right leaders in place), and • Process (co-creation, stakeholder engagement, social marketing). Self-perception, propagation of views on the products and services over the social media, celebrity endorsements, and brand promotions support the consumer attitude and drive emotional bonding. Such cognitive state of mind stimulates emotions, and consumers tend to get associated with the products and services by buying them repeatedly. The repeat buying phenomenon generate loyalty by upholding the emotions among consumers, which helps in inculcating the consumption behavior. Consumer with such learned behavior enjoy customer lifetime value and turn into social ambassadors of the brands by engaging in brand advocacy alongside the companies. Thus, ethnic marketing is sometimes challenging as several factors like consumption behavior, social and family culture, beliefs, and personal values intervene in buying decisions. The distinctiveness of cultural features like social media reviews are profoundly associated with emotional expressions that play a significant role in the buying behavior among consumers. The consumer behavior of young consumers is found homogeneous through the different ethnic consumer segments across the markets. However, some generational differences among consumers exist due to technology, social media interactions, and wider experience on consumption (Rajagopal and Castano 2015). Marketing of green products have become complex due to the mixed perceptions of consumers derived from the experiences shared through personal, social, ethnic, and corporate platforms. Therefore, the green marketing has not reached to the anticipated heights in the society. The consumer experience on sustainable products consistently show that their preference to choose a green product over conventional one, which is less friendly to the environment, rarely triggers the rationale in the minds of consumers for various reasons build on 4Cs comprising cost to customer (tangible and intangible cost); communication (clarity and conceivable); convenience (availability, delivery, and services); and change (resistance

188

RAJAGOPAL

versus adaptation). Consequently, when consumers are directed, through public policies, to make trade-offs between product attributes or helping the environment, the transformation in adapting to sustainability often fails. The success of green products is also hit by the negative perceptions of consumers related to 4Cs in combination with the 4As, which include awareness, attributes, affordability, and adaptability. In this context some consumer assume that such products are of lower quality or don’t really deliver on their environmental promises. Companies therefore, do not forget to consider that consumers are unlikely to compromise on conventional products and change in view of the psychosocial and economic factors comprising convenience, availability, price, quality, and performance (Ginsberg and Bloom 2004). Innovation in the consumer products and services have proved to be the strongest motivational tool, which induces the 4-E’s effect to drive motivation comprising explorative, experiential, expectative, and emotional cognition among consumers. The social media, digitalization of business, attractive purchase offers, and rapidly changing fashion trends have become the major motivational source for the consumers toward perceiving new consumption and value paradigms. The gaps in the transfer of brand knowledge between consumers and media often distract the consumer learning process. Companies engage consumers in knowledge co-creation and collaborative knowledge diffusion processes to support an interpretative model of the consumer knowledge. The knowledge cocreation process encourages diffusion of customer-generated contents on the social media, and helps in strengthening the community learning design. Consumers learn about product, services, and new consumption patterns though community resources. The community learning process prompts co-shopping and co-viewing of brands in the marketplace, which stimulates consumers to also review the referrals and conform to community decisions. Hence, most referral programs of the consumer products companies focus on diffusing brand awareness among the family or community as a source of knowledge hub of consumers (Rajagopal 2019a).

Social Consciousness Social conscience, which converges a person’s intuitive values with a mass moral-compass toward the society in general, can be described as the collective value. While rational, sociological, and philosophical arguments

7

CONSCIOUS CONSUMPTION AND MARKETING STRATEGY

189

often justify that conscience is primarily emotional but the secondary feelings are associated with community action and values. These emotions help to motivate social choices and behavior, playing an important role in the maintenance and transformation of social norms These norms are the sum of collective values and priorities of the society. In view of the global pressure on environmental protection and role of companies on managing social responsibility, the corporate sustainability is often considered as a top strategic priority. Companies, however, struggle to link the social responsibility projects with the profitability goals and often fail to gain the stakeholder value. The sustainability-based view of companies suggests that decisions on sustainability projects should be managed through a pyramidal paradigm with interrelated objectives comprising sustainability on the top, and social equity and profitability connected at the bottom-of-the-pyramid in a linear path. Critically, the triple bottom line comprising planet, people, and profit is congruent with the pyramidal paradigm. Accordingly, the corporate sustainability complements the traditional triple bottom approach through social consciousness and motivation to achieve relevant and timely competitive and societal impact (Schneider 2015). Learning communities are developed by the consumer-centric companies to transfer knowledge on social consumption causes like healthy foods, green consumption, organic farm products and the like. Such learning communities are designed primarily to increase consumer attitude toward learning new consumption patterns, and building convergence with social, ethnic, and personal values. Companies monitor consumer needs, perceptions, and expectations through the learning communities, and identify marketing strategies, which contributes to augmenting the consumer involvement in learning new consumption experiences and the perceived satisfaction. Digital consumer learning communities do attain positive outcomes; however, consumer education programs need to be developed specific to the requirements of geo-demographic segments (Andrade and Cohen 2007). Consumer engagement in companies not only builds high perceived values among consumers, but also helps in developing social consumption behavior. The positive psychodynamics among consumers though social media and interpersonal relations help in developing pro-brand perceptions, attitude, and behavior. Popular brands try to develop positive perceptions among consumers along the path to purchase, while utility brands influence consumer experience at every touchpoint. Whole Foods, in

190

RAJAGOPAL

the USA is an example of perceived value-based retailing on organic and sustainable products, which tends to generate consumer consciousness, experience, and organic consumption attitude. Consumers, with the support of growing information technology, view that purchase of organic brands are conventional, while the digital brands are utility brands. The social consciousness is built over time with the growing consumer experience and the accumulated values on organic and sustainable products as socially responsive consumer. There are several approaches to determine the social environmental consciousness. However, they are united by their common methodological position that embeds the individual and social consciousness toward the sustainability in multiple social-sectors (agriculture and allied sectors, natural resource management, public health, housing, education, and non-farm industries). There is a wide range of perspectives concerning social sustainability that need to be supported by the preferences of environmental consciousness. With the increasing social consciousness, global markets have entered into the new generation management involving stakeholders in developing customer-centric business strategies, and growing sustainable in the competitive marketplace. Consumers form perceptions on the viable solutions to the predetermined needs (recognized as problems), which match with their self-congruence, and could offer sustainable value (satisfaction). Social media is an attractive medium where consumers with changing mindsets interact with peers demonstrating their perceptual rationale, and validate their feelings and emotions. Their objective in engaging in social media is to learn about recent trends, new development of knowledge, or certain skill sets for further improvement in making buying decisions (Mathur et al. 2016). Consumer attitude is a convergence of perceived expectancy and perceived value evolved through the cognitive process of consumer perception. As this convergence becomes stronger over time, it helps in developing consumer attitude toward products and services. Consumercentric companies observe that sustainable attitudes leverage them toward developing long-term marketing strategies, and help them gain enough time and space for implementing these strategies. A sustainable attitude among consumers would lead to cultivating a behavior in due course of time. Consumer perceptions are sensitive to their experiences and help in building attitude if sustained for a reasonable period. Most consumer-centric companies ensure that consumers gain favorable and sustainable perception through brand campaigns, digital communications,

7

CONSCIOUS CONSUMPTION AND MARKETING STRATEGY

191

social media forums, and product and services trials. In this perceptual mapping process, the cognitive drivers help consumers in developing sustainable consumer attitude. This situation not only positions the brand as ‘top-of-mind’ element, but also encourages repeat buying among the consumers. Although most consumers tend to experiment with low priced products and substitute the products that deliver satisfactory experience, they fail to develop sustainable perceptions and build attitude toward repeat buying. However, industry attractiveness describes competition among traditional pipeline brands, which succeeds by optimizing the activities in their value chains (Rajagopal 2019a). Danone SA, a French multinational food company based in Paris, has been historically engaged in building social and environmental consciousness as a corporate strategy that focuses on economic and social objectives concerning sustainability. The company categorically considered the social and environmental focus as a part of its decision-making process. Danone communicated its industry-leading efforts to internal and external stakeholders, who were socially conscious about the environment and sustainability. However, over time, the company had learned that it was not enough to have internal systems and data to justify its environmental consciousness. For example, the carbon accounting initiative of the company demonstrated the firm’s progress in reducing its carbon footprint. However, the company did not make use of widely accepted carbon accounting standards, which largely discounted its efforts in generation the social values (Arjalies et al. 2018). Sustainability in social products market is driven by the speed of innovation and technology alongside the trendy products and changing social values. Companies launch new sustainable products in the competitive marketplace with hedonic or utilitarian values to attract consumers. Consumers develop sustainable perceived use values if the product attractiveness is endorsed by the brand awareness and brand experience. In addition to the newness of products, vogue, social value, ethnic perceptions, and consumer beliefs inculcate the experiential attitude among consumers. Most social-centric companies develop new products as ‘design-to-value’ by involving consumers in co-creation process. Such consumer and stakeholder engagements in new product development help companies manage seasonality of products effectively in the marketplace and develop sustainable consumer attitude and consumption behavior. Therefore, it is observed that like social needs, consumer

192

RAJAGOPAL

behavior also turns value oriented over time. The consumer value chain often supports sustainability and social consciousness. The first electric hyper-car has been manufactured and rolled out in the Indian market, in which it was promoted that the car offers a blend of art and science, in contrast to other hyper-cars that were designed to appear aggressive and driven completely by the sustainable technology. Anthropomorphism and self-image congruence are associated with the consumers buying behavior. However, building attitude for consumer in marketplace is often more impulsive than judgmental, as attitude is largely determined by the pressure of consumer needs, available choices, and sustainable consumer perceptions. Companies can achieve uniqueness in business strategies by understanding the market trend and the consumer preferences. It is widely believed that continuous management learning helps the managers track market developments and take right decisions to drive the organization in the desired direction. Applied organizational learning is the basic philosophy that underpins the ideas of achieving competencies and capabilities in management of corporate and functional issues (Agnihotri and Bhattacharya 2019). Often, a positive consumption experience guarantees satisfaction, and develops brand loyalty and sustainable behavior among consumers over time. Consumers active on social media also develop knowledge, perceptions, and motivations through the user-generated contents and experience sharing. As social media is dynamic, it attributes to the variable consumer behavior. As the innovations in the business-to-consumer and business-to-business segments have shown the tendency of boom and bust, one of the major concerns for the companies carrying out innovative business projects is to make it competitive and sustainable in the marketplace over the spatial and temporal dynamics (Rajagopal 2019a).

Concept Mapping and Semantics Concept mapping for developing consumer behavior for sustainable products and services varies based on the needs and problems of consumers and expected solutions. Self-help groups work in close proximity of consumers to know their needs and perceptions on sustainable products and services. The perceptual mapping has merged as an advantageous exercise for companies to know the cognitive semantic of consumers about their needs and problems. The underlying challenge in perceptual

7

CONSCIOUS CONSUMPTION AND MARKETING STRATEGY

193

mapping for developing appropriate concepts to develop sustainable products is to understand the mind of consumer. This serves as nucleus of the business ecosystem, and is intertwined with the psychosocial, economic, political, technological, and legal complexities. The consumer yet acts as the pivot of business and overpowers the markets across regions. Understanding consumer is as complex as the neuroscientists claim, that about 10% of the total potential of human mind has been discovered as on today. Learning from consumers is a grassroots expedition for researchers to explore the emotions, perception, attitude, and behavior that lead to the semantics of decision-making within the dynamic of business ecosystem. Most companies engaged in manufacturing and marketing of sustainable products and services believe in conducting design-based research with qualitative and narrative focus to know the perceptions of consumers. Qualitative inquiries are founded on reasoning and thematic connectivity of arguments entwined in a research domain. Such inquiries are held through in-depth interviews, perceptual mapping, cognitive semantics, and sharing of experiences across spatial and temporal dimensions. As the qualitative inquiry is based on sharing experiences and forethoughts, and mapping semantics of perceptions, it needs to be organized in a place that respects privacy and personality (Rajagopal 2019b). Perceptual mapping would help in developing concepts of sustainable products and services by understanding the homogeneity in the consumer responses. Joining several responses to the related questions on perceptual map can guide the researcher in determining the state of emotions (like happiness, sadness, anger, commanding, aggressive, defensive, and submissiveness). Interpreting emotions in qualitative research leads to establish the thrust of responses-vertical (self-image congruity) and horizontal (social-image congruity). The thrust in responses reinforces the respondents’ involvement in the research and the commitment in responses. Consumer perceptions tend to identify attributes of the objects that match with the personality and social values. The cognitive state of consumers attempts to converge with the personality and social entity. The consumers perceive ‘familiarity or belongingness with an entity’ upon realizing the similarities and dissimilarities between members of the social in-group and various out-groups. As consumers are becoming more sensitive to the sustainable products and services, most companies are becoming more aware of consumers’ subconscious responses. To influence customers by stimulating an emotional response, companies today are relying less on traditional

194

RAJAGOPAL

advertising and marketing, and more on the products themselves. The concept development through sensory marketing, helps companies in developing appropriate attributes to match with the consumer perception and behavior. It explores how deliberate sensory and utilitarian inputs can impact customers on a subconscious level by triggering positive emotional responses to products and brands. The concept development and prototype designs have made advances in neuroscience and neuro-imaging techniques that have enabled more effective use of concept development and sensory marketing (Krishna 2019). Consumer-oriented innovation is an increasingly important source of new product development and competitive advantage in reference to the speed with which product innovations are introduced to the market. In many cases, aesthetic properties are as important as technical functions. When one considers the subjective part of the requirements, the feelings, impressions, sensations, or preferences of the consumers must be quantified and modeled in advance. This is a major challenge in new consumer products design (Petiot and Grognet 2006). Semantics is concerned with interconnected words, and their meaning and contextual relevance in the research. The formal semantics is the study of logical aspects of meaning such as sense, reference, and implication within the context of the research study. The logical and lexical semantics studies the word meanings and their etymological relations within the research domain, while the conceptual semantics studies the cognitive structure of meaning. The research on sustainable consumer behavior can follow any of the suitable semantics methods to develop a semantic map during the interviews, and interpret the semantics during the information analysis of qualitative inquiry. Semantics is the linguistic and logical expression of the meaning of the research problem interrelated with a variety of variables determining causes and effects. The semantics can be predetermined, or formal semantics can be developed during the initial study process. The semantics of the problem describes logical aspects of derived meaning, such as sense, reference, implication, and logical form, to justify the research problem and choose appropriate study design. Consequently, semantics helps in concept development and testing of prototypes of sustainable products and services. Semantics comprising contextual meanings, interrelated logics, and ideas can be documented during the qualitative research process as an outgrowth of mind mapping exercise. The lexical semantics can be plotted around the core idea and interlinked in reference to word meaning and symbiotic rationale.

7

CONSCIOUS CONSUMPTION AND MARKETING STRATEGY

195

The problem defined by the consumers to develop appropriate stainable products and services can further be supported by socio-economic, ethno-cultural, and cognitive semantics. Perception among consumers is a cognitive process, which registers the instant feeling of any product, services, or a situation. It is a process of recognizing sensory stimuli, which builds awareness and knowledge base. Consumers develop perceptions by self-generated stimuli and by drawing inferences from other people in the society. The social perceptions make consumers learn about the feelings and emotions from anchor personalities in the society by analyzing information on physical appearance, and verbal and nonverbal communication. Self-perception by customers relates to the values and motivations that drive buying behavior. Visual attraction of products, emotions, self-congruence and perceived experience, knowledge and beliefs, and psychosocial insights about the products drive the perceptions of consumers, which helps in developing attitude and behavior in future. Consumers derive their beliefs from the learned culture, self-references, values perceived from the society and cognitive factors. The effects of ethical beliefs and consumer perceptions on purchase intention affect the consumer trust (Rajagopal 2020). Consumers are the conscious agents of change in the marketplace, who are capable of altering the demand for existing products and services by identifying and articulating their needs and desires. Consumer-centric companies, thus, invest heavily in mapping consumer cognition and understanding their implicit preferences to revise product designs and make advertising more appealing to them groups (Baumeister et al. 2017). Consumers develop semantic map of values, while analyzing a product through the available verbal and nonverbal information, and build knowledge base to support decision process. They systematically estimate the values associated with the products, validate the influencing factors, and compare them with the preferences emerged during the subconscious state of mind by analyzing episodic memories. Consumers derive the realm of choices from the merits of the products and congruence of the episodic memories to construct decision paradigm comprising products offered, knowledge and influence, subconscious cognition, value determinants, and self-actualization. Such paradigms build cognitive ergonomics and explain a wide array of phenomena in decision-making. Distinctive capabilities of the Internet as a platform for customer engagement including interactivity, enhanced reach, persistence, speed, and flexibility suggest that firms can use these capabilities to engage customers

196

RAJAGOPAL

in collaborative product innovation through a variety of Internet-based mechanisms. The network mechanisms can facilitate collaborative innovation at different stages of the new product development process, and for differing levels of customer involvement (Rajagopal 2019a). Most companies are inculcating radical buying behavior among consumers by generating brand literacy through the interactions of consumer communities on social media. Facebook, Twitter, and Instagram have been the principal platforms of consumer networking for most of the consumer-centric companies. Companies explore the consumer needs and preferences on the digital platforms, and tend to meet consumers’ rising expectations on the products and services they intend to buy. Simultaneously, consumers also stay critical to the multichannel experience of peers on their preferred brands to reaffirm their purchase intentions. Most consumers are unable to make right buying decision because they do not acquire desired information and analyze the key indicators critically. In an appropriate decision-making exercise, consumers must be able to define their problem carefully and look for an appropriate solution. However, understating the problem and determining ‘what they want’ is a complex question. Consumers make cognitive exercises for getting to the bottom of problem. It largely depends on the level of precision on selecting criteria, determining the scope of available information, and identifying number of substitute options (Sofi and Nika 2017). Consumer cognition is often influenced by the societal values, referrals, and peer reviews within the ethnic and cultural boundaries. Sometimes, with the strong effects of acquired culture and knowledge, consumers tend to choose the values and lifestyles beyond the ethnic and cultural boundaries of the society. Such consumer cognition radicalizes the decision-making process. In addition, acquired knowledge, self-learning, ability to critically analyze the information, and observations based on causes and effects help consumers rationalize their cognitive frameworks. However, cognitive rationales are often disrupted by the subconscious movements and affect the conscious thinking. A refined cognitive framework helps consumers reach self-actualization over time (Rajagopal 2020). Idea generation in the process of new product development is a major exercise. This technique calls for listing of all major attributes of the existing product and the required attributes in order to improve the same product. The forced relationship of the new product with the existing accessories also needs to be studied e.g. developing a solar energy set

7

CONSCIOUS CONSUMPTION AND MARKETING STRATEGY

197

may be related with the consumer need for the domestic lighting and sectoral activities (agriculture and non-farm sector), multi-purpose activities, user training, cost of maintenance. Such forced relationship has to be identified by the company before launching the product. The morphological analysis calls for identifying the structural dimensions of a problem and examining the relationships among them. The need identification can be done by interacting with the potential and existing customers in a focus group meet. The industrial marketers can identify new product ideas working in association with the lead users of the product (Rajagopal 2016).

Marketing Strategies for Sustainable Products Implementation of effective marketing strategy is a ‘building-block’ exercise, which requires perfect coordination among various elements of marketing-mix and associated attributes like emotions, validity of decisions, and consumer value. Such architecture of marketing strategies helps companies in developing a brilliant breakthrough of their products and services in the competitive marketplace. There are several ways experimented by the companies in the past century to develop and implement a successful marketing strategy. Marketing strategies are developed by the companies to fit into organizational design of the companies. Design of a marketing organization is founded on the structural variables, organizational resources including human capital and finance, capabilities and competencies, and the workplace culture. The performance of marketing strategies varies for the companies with different organizational designs representing prospectors, analyzers, low-cost defenders, and competitive differentiation-oriented company policies. As the competition is increasing, companies are shifting from categoryfocused marketing to an ecosystem-focused strategic mindset, which accounts for the network-based marketing engaging consumers in codesigning market performance and values. Such shifts in corporate philosophies have altered consumer preference, strategy choices, and customer networks from conventional platforms. The impact of the shift in strategic mindset toward ecosystems on competitive structure analysis has induced companies to follow strategies of successful brands, competitive strategy analysis, promotion planning, new product development, customer valuation, strategic alliances, and market segmentation (Dass and Kumar 2014).

198

RAJAGOPAL

Product attractiveness is largely driven by the product design, competitive leverages, and consumer preferences. Hence, most consumer-centric companies are engaged in cocreating product designs. Companies engage consumers to share their experience, while the consumers offer solutions to the companies in the form of products designs, services, and expected values. Companies deliver these cocreated tangibles in the competitive marketplace. Product differentiation is another major challenge for consumer-centric companies to stay ahead of marketplace competition. Price is a sensitive tool for fixing profitability in the consumer-centric companies. Every fluctuation in pricing leave a significant impact on both revenues and profitability of the company. Therefore, ineffective planning in pricing affects the profitability of products and services in a company. In the competitive marketplace, where attractive products are offered frequently, consumers exhibit varied preferences, lean toward dynamic motivations, and show inconsistency in propensity to spend. Most of the advertisements of consumer products in the contemporary business are based on user-generated contents and consumer experience shared on the social media. The promotional strategies are evaluated by the companies in reference to its impact on volume of sales, market share, and their contribution to the profit specific to the products and services. The promotional strategies of consumer-centric companies have turned as a large and growing part of marketing budgets of companies worldwide.

References Agnihotri, A., & Bhattacharya, S. (2019). Vazirani Shul: India’s First Electric Hypercar. London, ON, Canada: Ivey Business School Press. Amram, M., & Kulatilaka, N. (2009). The Invisible Green Hand: How Individual Decisions and Markets Can Reduce Greenhouse Gas Emissions. California Management Review, 51(2), 194–218. Andrade, E. B., & Cohen, J. B. (2007). On the Consumption of Negative Feelings. Journal of Consumer Research, 34(3), 283–300. Arjalies, D. L., Rodrigue, M., Gibassier, D., & Mark, K. (2018). Danone: Adopting Integrated Reporting or Not? (A). Boston, MA: Harvard Business School Press. Baumeister, R. F., Clark, C. J., Kim, J., & Lau, S. (2017). Consumers (and Consumer Researchers) Need Conscious Thinking in Addition to Unconscious Processes: A Call for Integrative Models, a Commentary on Williams and Poehlman. Journal of Consumer Research, 44(2), 252–257.

7

CONSCIOUS CONSUMPTION AND MARKETING STRATEGY

199

Comstock, B., Gulati, R., & Liguori, S. (2010). Unleashing the Power of Marketing. Harvard Business Review, 88(10), 90–98. Dass, M., & Kumar, S. (2014). Bringing Product and Consumer Ecosystems to the Strategic Forefront. Business Horizons, 57 (2), 225–234. Ginsberg, J. M., & Bloom, P. N. (2004). Choosing the Right Green Marketing Strategy. MIT Sloan Management Review, 46(1), 79–84. Haley, U. C. V., & Schuler, D. A. (2011). Government Policy and Firm Strategy in the Solar Photovoltaic Industry. California Management Review, 54(1), 17–38. Krishna, A. (2019). Note on Sensory Marketing: Shaping Consumer Perception and Behavior. The University of Michigan: WDI Publishing. Mathur, P., Chun, H. H., & Maheswaran, D. (2016). Consumer Mindsets and Self-Enhancement: Signaling Versus Learning. Journal of Consumer Psychology, 26(1), 142–152. Petiot, J. F., & Grognet, S. (2006). Product Design: A Vectors Field-Based Approach for Preference Modeling. Journal of Engineering Design, 17 (3), 217–233. Quelch, J. A., & Jocz, K. A. (2007). Consumption: The Happiness of Pursuit— The Implications for Marketing and Politics. Boston, MA: Harvard Business School Press. Rajagopal. (2016). Sustainable Growth in Global Markets: Strategic Choices and Managerial Implications. Basingstoke, UK: Palgrave Macmillan. Rajagopal. (2019a). Contemporary Marketing Strategy: Analyzing Consumer Behavior to Drive Managerial Decision Making. New York: Palgrave Macmillan. Rajagopal. (2019b). Qualitative Marketing Research: Understanding How Behavioral Complexities Drive Marketing Strategies. New York: Business Expert Press. Rajagopal. (2020). Market Entropy: How to Manage Chaos and Uncertainty for Improving Organizational Performance. New York: Business Expert Press. Rajagopal & Castano, R. (2015). Understanding Consumer Behaviour and Consumption Experience. Hershey, PA: IGI Global. Reyes-Mercado, P., & Rajagopal. (2017). Adoption of Renewable Energy Technologies in Mexico: The Role of Cognitive Factors and Innovation Attributes. International Journal of Energy Sector Management, 11(4), 626–649. Rothaermel, F. T., & Hoepfer, M. (2012). Siemens Energy: How to Engineer a Green Future? Boston, MA: Harvard Business School Press. Schneider, A. (2015). Reflexivity in Sustainability Accounting and Management: Transcending the Economic Focus of Corporate Sustainability. Journal of Business Ethics, 127 (3), 525–536. Sofi, S. A., & Nika, F. A. (2017). Role of Intrinsic Factors in Impulsive Buying Decision: An Empirical Study of Young Consumers. Arab Economic and Business Journal, 12(1), 29–43.

PART III

Moving Towards a New Shift

CHAPTER 8

Eco-Innovation and Technology

Sustainability perspectives span across a wide array of products and services ranging from agriculture to food-consumption, and construction engineering to common consumer products such as mobile phones. Eco-innovation therefore appears as an omnipresent need across businessto-business and business-to-consumer industries. This chapter examines how open innovation activities can promote eco-innovations in the industry and society despite the traditionally low cooperation in developing economies. The role of frugal innovations on sustainability needs, their branding and marketing strategies, and product value management are also addressed in this chapter. This chapter emphasizes on the external and internal factors that help companies in implementing environmentfriendly business activities and developing green capabilities with retailers, service providers, and civic bodies. Ecological innovations are evolving chronologically in the society over the years. In the traditional societies, conservation of natural resources line land and water, and agricultural production have been used with conventional wisdom in the developing countries. The concept of ecoinnovation has received scientific attention after the post-World War-II period, after United Nations Framework Convention Climate Change in 1992 promoted by all nations. This initiative has been followed by recent Paris on climate change in 2016, which was signed by the developed countries. Over time the ecological innovations have shifted from large companies to niche enterprises as the latter follow cost-effective © The Author(s) 2021 Rajagopal, Sustainable Businesses in Developing Economies, https://doi.org/10.1007/978-3-030-51681-9_8

203

204

RAJAGOPAL

and price-competitive strategies. The eco-innovations at niche markets in developing countries are aimed at the low-income consumer communities who are the big target toward contributing to the social sustainability. The polyethylene terephthalate (PET) bottles have a low recycling value in the Uganda markets, which has driven people to discard PET bottles. Consequently, such public behavior has caused heap of PET bottles, driving society to take easy action of either burning or strewing them across streets and fields as litter. The solution to such ecological issue has been proposed by a local company with a low-cost frugal innovation companyTakataka Plastics.1 This niche-based company has focused on the use of plastic for construction materials and innovated plastic wall tiles. The company has founded its manufacturing model with the generic equipment and locally built machines as they are cheaper and easier to maintain and fix if they break. The company has used an open-source design for their machines and modified them to be adaptable to locally available parts and fabrication techniques. These machines are easy to replicate and inexpensive to scale the project up. Takataka is an emerging example of a home-grown solution to a local problem. The company is currently working on a small scale but in the future, it could create a source of income not only for informal waste collectors in the country but also be able to deliver a macro-frugal solution to complex social sustainability issues in the similar economies. The initiatives of Uganda in promoting social consciousness on environmental protections as a developing nation sets new dimensions to social values-led business modeling. There are several such best practices that drive butterfly effect on eco-innovation and sustainability-driven projects across countries. Strategies of firms, which emerge out of market environmental chaos, help firms in stimulating eco-innovations and sustainability-led business modeling in local markets to achieve greencompetitiveness in the global marketplace. Consequently, every small change emerged out of the social enterprises contributes to a long-range global and sustainable effect in the market. While large and multinational firms have historically relied on technological know-how and reliable processes, they are planning to develop competencies in external relationships for sustainability in the competitive marketplace. External relationships help firms in strengthening and extending their organizational 1 Takataka, means ‘waste’ in Swahili. Company website https://www.takatakaplastics. com/.

8

ECO-INNOVATION AND TECHNOLOGY

205

core competencies while responding to the demands of globalization, mass customization, enhanced quality, and rapid technological change (Rajagopal 2015)

Eco-Innovations and Complexities The expansion of ecological innovation has been accompanied by the philosophy of in-home solutions with low-cost technologies and high-utilitarian values. Considering the growing global environmental concerns, such as green energy and increasing scarcity of resources, the manufacturing industries have shown more interest in sustainable production with the social business models. These models present the low-end econoscape for the consumers and are jointly implemented through the public–private partnership as corporate social responsibility (CSR) initiatives. However, the social awareness and effective implementation of public policies have improved the efficiency of sustainable consumption and growth of the emerging markets. Reduction in the emission of greenhouse gases has been considered as priority among the governments of developing countries; and many have adopted strategic frameworks. Interestingly, the economic leverage to enterprises engaged in manufacturing green products and providing eco-conservation services developing countries have raised public interest and expectations from the environmental protection programs to achieve sustainable development. In developing countries, the green recovery public policy has attracted public investment in environmental technologies and encouraged the implementation of collaborative sustainability projects. Green recovery projects are targeted toward regenerating ecological conservation that have been affected by the community ignorance in urban-rural geo-demographic segments. The green recovery concept has geared-up over tine as a core part of economic stimulus measures at global–local levels. Over time, the manufacturing industries in the food products, textiles, construction, consumer durables, and transport sectors have shown significant progress in achieving sustainable production. Manufacturing processes in these industries have shifted from end-of-pipe solutions to a focus on product lifecycles and integrated environmental strategies and management systems. Manufacturing process to achieve sustainability have shifted to closed-loop production, circular production systems, and adaptation of circular business models. Eco-innovation today is encouraged by the political vision and revised public policies in view of the

206

RAJAGOPAL

circular economy principles. Consequently, manufacturing and services industries have adapted to frugal, radical, and systems improvements in the eco-innovation products to achieve environmental performance and make positive contribution toward sustainable development in a competitive economy. The eco-innovation in the sustainability-led business models targets (the society as business hub) its mechanisms (as methods to introducing changes in the target) through long impacts (on consumption behavior). Sustainable manufacturing involves the changes that are facilitated by eco-innovation and integrated initiatives such as closed-loop production leads potentially to yield higher environmental improvements. However, making sustainable manufacturing adaptable in small and medium firms requires appropriately combining a low-cost innovations targets and niche business models. Innovation and technology development arise from a complex set of relationships among industry, business firms, society, and consumers besides the government that intervenes through the public policies. This system is different in each country and influenced by the national policy and institutional context. Social organizations, non-governmental organizations, and government are pivotal in creating social and industrial systems that supports these various relationships in the context of sustainability-led business modeling. Such convergence of social needs, industrial manufacturing, and eco-innovations encompass institutional capacity and its strength or weakness in a country as a key factor in the development and transfer of technology. In small and medium companies, institutional capacity is often weak due to the resource limitations, the development and adaptation to eco-innovation technologies are delayed. The administrative overheads and transactional inefficiencies contribute to increase in both tangible and intangible costs for small and medium enterprises. Ineffective integration of information, policies, resources, processes; and coordination between various government departments, social needs, and corporate social responsibility initiatives may stay misaligned and ineffective in managing and implementing the sustainability projects effectively. Disruptive innovation in ecological conservation and delivering social sustainability products possess utilitarian values at competitive prices. Such products and services are designed for a new set of customers, which differentiate them from the existing stream of buying. Generally, disruptive innovations are technologically straightforward and convincing

8

ECO-INNOVATION AND TECHNOLOGY

207

to consumers, and generate value for money. Some disruptive innovations offer more for less to customers through a different package of attributes that have higher significance to the consumers in the bottomof-the-pyramid market segment than to those of the mainstream market. Large firms are quick to take advantage of disruptive innovation and offer product differentiations by ways of customization, price competitiveness, desired solution to the sustainability problems and convenience in the global–local markets. However, large companies need to develop an ethnic innovative perspective, a local business vision, prevention against disruptive and counterfeiting products in local markets, developing partnerships and alliances at the destination market, and drive a supportive consumer ambience. Most companies explore the cost-effective, nichebased strategies to transform the various social consumption practices and enhance the performance social sustainability. There are many significant ways to increase customer value expectations and social practices, as given below (Rajagopal 2015): • Increasing productivity in farm and non-farm sectors, consumer products, industrial sector, and transport and logistics sector workplaces by improving environmental conditions, green recoveries, • Developing eco-innovations and sustainability-based business models, • Building sustainability profile of enterprises for enhancing the social values and quality of life, • Improving eco-innovation outputs to link with sustainability-related processes, • Developing sustainability efforts within social- and industrial workplace culture to drive productive collaboration between social organizations and corporate houses, and • Inculcating transparency and trustworthiness among stakeholders to ensure competitive success through eco-innovations and green recoveries. Companies in developing economies are largely known as environmental laggards, but they are being pushed to proactively address the environmental and consumer values. These companies observe that in the markets where resource depletion is common, eco-innovation and conservation of

208

RAJAGOPAL

energy in products add vale in the business process and stay as differentiators to gain competitive advantage. Some of these enterprises pursue sustainability out of pragmatism, some others out of idealism, but all of them generate sustainable growth rates and profit margins as long as they stay consumer centric and deliver desired values. Large companies intend to achieve the sustainable goals by taking a holistic view and investing in technology led operating methods that could lead to lower costs and higher yields in business. Companies that have longstanding reputation in the market also follow bootstrapping by making small adjustments that generate big savings and drive sustainable butterfly effects in global marketplace. Companies that are successful in developing butterfly effects through small change models buy advanced technologies over the period and extend their sustainability efforts to the operations of their subsidiaries, customers, and suppliers. Collectively, such companies demonstrate that no trade-off is needed between sustainability and financial performance and advocate strategies leading to sustainability as a powerful path to reinvention to standout in market competition (Haanaes et al. 2013). Sustainability in business grows in organizations that have strong business leadership and based on cohesive organizational culture. Effective management of knowledge by ways of generating and sharing information, collective decision-making, staying innovation oriented, and utilizing intellectual capital in the right perspectives would help in developing sustainable organizational culture, which contributes to the over sustainability of the business of a company. Eco-innovations in business is a strategic support the social and ecological sustainability. However, most companies look for quick growth in business as they skip exploring the social and environmental growth opportunity. Investing in eco-innovation projects in emerging markets to build long-term sustainable gains in the market is a credible strategy.

Eco-Innovation Attributes and Management Continuing growth in global population, increasing density of urban and rural habitats across countries, and the ecological and sustainability concerns are being overlooked for economic growth by overexploitation of natural resources. This situation demands for affordable ecological innovations in some vital economic sectors like energy, transportation and logistics, solid and industrial waste management, and reducing particle

8

ECO-INNOVATION AND TECHNOLOGY

209

and gaseous pollutions. The low-cost innovations to improve the social and industrial sustainability would help in managing resource scarcity and over-allocation issues that are increasing the pressure on natural resources. In this scenario, ecological governance is positioned as a critical issue not only for large industries but also for the small and medium firms operating in regional markets (Molle et al. 2018). Innovation is the critical dimension of economic change in a macro perspective and business growth within the micro perspective. At macro level, economic change revolves around innovation and catalyzes entrepreneurial activities that lead to drive market power. As the market competition is continuously increasing in the global marketplace, the innovation driven market power could provide better results than the conventional wisdom like price and promotion competition. Alongside of product design and strategy innovation, technological innovation often creates ad hoc monopolies in the market allowing abnormal profits in a short lifecycle. Such temporary monopolies are sometimes necessary to provide incentives for firms to develop new products and processes (Pol and Carroll 2006). Much attention has been paid recently to innovation as a way for industry and policy makers to achieve more radical, systemic improvements in corporate environmental practices and performance. The socialecological innovation has emerged as an important consideration in environmental governance in addition to the sectoral issues in sustainability. Eco-innovations encouraged in local markets contribute to the resilience of ecosystem services in urban socio-economic and ecological landscapes. Consequently, urban and rural areas need implementation of green recovery programs as a range of important ecosystem services. Urban centers have grown in the recent past with the satellite industrial production centers, and have observed degradation of environmental standards over the years. These centers have become combined geodemographic segments with industrial production centers and populous habitats. Crowdsourcing of innovative ideas, collective intelligence to improve the resources utilization, and management of green space in urban social-ecological systems have emerged as effective tools to manage sustainability projects. Such practices are able to drive public–private partnership to develop social-ecological innovation and provide a valuable resource in the production and adaptive management of local ecosystem services with social governance efficacy (Dennis and James 2018).

210

RAJAGOPAL

Many companies have started to use eco-innovation or similar terms to describe their contributions to sustainable development. A few governments are also promoting the concept as a way to meet sustainable development targets while keeping industry and the economy competitive. However, while the promotion of eco-innovation by industry and government involves the pursuit of both economic and environmental sustainability, the scope and application of the concept tend to differ. Impact refers to the effect of eco-innovation on the environment across its lifecycle or some other focus area. Potential environmental impacts stem from the target and mechanism of eco-innovation, and their interplay with its socio-technical surroundings. Given a specific target, the potential magnitude of the environmental benefit tends to depend on the mechanism of eco-innovation, as more systemic changes such as alternatives and creation generally embody higher potential benefits than modification and redesign. The community-based natural resources management has been encouraged by the social organizations (self-help groups and non-governmental organizations) on the assumption that the decision-making process in natural resource management is a collective process within the communities and among stakeholders. This community approach has not only fostered knowledge and commitment among the stakeholders, but also stimulated ecological innovation in start-up enterprises at the local level. However, commercialization of frugal and reverse innovations in the green economic and industrial sector is a major challenge. The problem of commercialization of innovation is largely attributed to the interface of top-down (public policies and funding) and bottom-up approaches (social and entrepreneurial governance), which primarily involves the inter-institutional arrangements to diffuse and market the innovations (Armitage 2005). Ecological innovations have become dispersed as the market is becoming increasingly demanding and the users have formed their niche. Accordingly, innovation has shifted from technology to business models, and is more focused on marketing than the social needs. Many innovations are emerging in the market that are simplified, while some are scaling up in improving the existing products or services and positioning them as innovations. However, managers may align their business strategies with competitive advantages of markets and manage innovation in emerging economies to diffuse and commercialize (De Meyer 2011). Traditionally positioning innovation of products and services makes a company competitive is a myth in the present state

8

ECO-INNOVATION AND TECHNOLOGY

211

of global marketing. Consequently, firms continually reinvent in large and small ways in reference to shift in market demand and changes in the economy and develop competitive marketing strategy in reference to the shifts in the product and market behavior, knowledge of innovative products, and innovation positions. Though the company may develop efficiency with regard to the above strategic positions of product/market, knowledge and innovation independently, the firms are still risk averse with the innovation (McDonough et al. 2008). Successful innovation leads to customer involvement and profits, which can be achieved through the cocreation by aligning consumers and market players in the innovation process. Some multinational companies have invested in sustainability projects by taking advantage of social media to diffuse new ideas and stimulating cocreation of innovative products and services. For example, the role of cocreation has become central to the sustainability management in the social initiatives of twenty-first century. Energy market transition, which is enabled by new affordable energy technologies and digitalization, opens novel opportunities for developing innovative energy solutions through collective intelligence and public–private cocreations. The new technologies emerging through cocreation facilitate stakeholders to buy low-cost renewable energy. The process of coinnovation is stretching the ideation process through the extensive use of digital platforms and stakeholder involvement. Coinnovation is an ecosystem-wide activity that involves multiple stakeholders, who collaborate toward a shared social goal and explore niche strategies to commercialize eco-innovations. However, in active societies like Chinese sociological and business culture, the co-innovators simultaneously compete with one another across the geo-demographic segments to market their innovative products and services (Kotilainen et al. 2019). For many companies, developing new products does not occur as a chance or coincidence; innovative products emerge through careful attention to many important criteria. Firms should analyze their innovation practices and capabilities to become more effective in driving innovation as breakthrough, and gain the competitive advantage. Innovation and enterprise-integration are two compelling sources of growth in a dynamic competitive marketplace. The ability to coordinate across organizational boundaries largely appears as a critical factor in determining the speed and lifecycle of a market-driven innovation. Innovations need to be integrated into the larger operations of the corporation at sufficient level of scale to show a prolific impact on business and sustainability in the marketplace.

212

RAJAGOPAL

Many large businesses spend resources on innovations but fail to capitalize on them. However, some organizations use innovations to optimize local operations than integrating them to create consumer value and corporate image. Innovations leading to commercialization phase have the major challenge of convincing the customers to adopt them successfully and gain value for money. The diffusion of innovations (DOI) theory suggests that the innovators and the early adopters are generally sensitive to low price and high-quality combinations, and are technologically more comfortable. The lead customers are also risk-tolerant, as compared to the later categories of early- and late-majority mass-market users. The real commercialization challenges for an eco-innovation (alike other products and services) emerges when it is moved to the mass consumers’ market. These features make the innovators and the early adopters more willing to test premature products, whereas the later adopters expect high quality and value for their money. However, cocreation of second- generation innovation with end users can be more prolific to business, which encompasses a range of activities, for example, collecting user feedback, lead user engagement, modified prototype development, product testing, pricing and distribution strategy, and integrating servitization process (Nambisan 2010). Sustainable Manufacturing There is a prolonged debate on the process of the sustainable manufacturing and the role of corporate sector in improving the ecological innovations to support the industrial and consumer products manufacturing. Public policies in both developed and developing countries have categorically addressed that the manufacturing industries need to balance their manufacturing process among society, business, and environmental concerns. Consequently, large companies have successfully integrated sustainability-driven business modeling. It is, therefore, crucial for industries to adopt cocreated innovative paradigm in confidence with the market players, stakeholders, and regulatory authorities on environment protection, to streamline their operations to be environment-friendly. Sustainable Manufacturing (SM) is one of such business initiatives connecting with the social and environmental issues. The SM companies also integrate the environment aspects together with the economic and political aspects of the business (Esfahbodi et al. 2017).

8

ECO-INNOVATION AND TECHNOLOGY

213

Over time, more integrated sustainable manufacturing initiatives adapt to closed-loop production, which can potentially yield higher environmental improvements in the medium to long term. Such effect can be realized through a combination of a wider range of innovation targets and mechanisms aimed at serving the larger geo-demographic area. For instance, an eco-industrial park cannot be successfully established simply by locating manufacturing plants in the same space in the absence of technologies or procedures for exchanging resources. In fact, process modification, product design, alternative business models, and the creation of new procedures and organizational arrangements need to go hand in hand to leverage the economic and environmental benefits of such initiatives (OECD 2009). This implies that as sustainable manufacturing initiatives are pushed by the companies and public policies, the eco-innovation process becomes increasingly complex and more difficult to coordinate. These complex and advanced eco-innovation processes are often referred to as system innovation wherein an innovation is characterized by fundamental shifts to meet the social needs (Geels 2005). Although system innovation may emerge as a part of technological advances, technology alone cannot make a great difference. It has to be associated with organizational and social structures to validate the technological development and its effects on the society. While this may indicate the difficulty of achieving large-scale environmental improvements, industries need to integrate social, economic, and cultural elements of the eco-innovation process to maximize the environmental benefits. The feasibility of their eco-innovation approach would then depend on the organization’s ability to engage in such complex processes (OECD 2009). Sustainable manufacturing does not only achieve environmental protection, but also benefits customers, employees, and economic needs and the communities of the society. SM has emerged out as an intriguing concept, which demands strategic attention from the business practitioners. SM should be extended throughout the business by being employed to products, processes, and services of the industry. Incremental innovation is a common phenomenon in all types of consumer products ranging from toothpaste to an automobile. It is a process of continuous innovation over the existing products. Most firms prefer to engage in a series of small improvements to an existing product or product line that usually help in maintaining or improving their competitive position over time in the industry or against rivals. Incremental innovation is regularly used within the high technology business by companies that need to

214

RAJAGOPAL

continue to improve their products to include new features increasingly desired by consumers. However, radical innovation is about making major changes in existing products taking few stages ahead of the routine incremental innovation. A radical change can represent a radical innovation at a technological level, but the impact may show incremental trend from an organizational perspective. The term radical often refers to the level of contribution made to the efficiency or revenue of the organization (McLaughlin et al. 2008). For example, by introducing the flat-screen television, manufacturers radically increased the demand for such products. Ambidextrous innovation is a value addition to the incremental innovation that refers to the dexterity of an organization to be efficient in its management and also adaptable to the shifts in market behavior. The recent global economic recession (2007–2011) has driven most firms, including large multinational companies, toward concentrating on small improvements in the product line instead of investing resources in new product developments of working with innovation afresh. Firms, irrespective of their size, must be capable of managing different innovation streams for being successful in the global marketplace. The incremental innovations help firms to leverage their posture in the marketplace, while the architectural innovations reconfigure firms’ technology in reference to future business growth in the marketplace (Gary 2003). The eco-innovations and sustainable manufacturing are intertwined. For example, the eco-innovations in air-conditioning industry has revolutionized through hot or cold water function through pipes to the units located on each level of the building. The amount of cold water varies according to the desired temperature relative to the outside temperature. The New Energy and Industrial Technology Development Organization (NEDO), a public organization established by the Japanese government, coordinates R&D activities in the eco-innovation process of hydro-airconditioning system for industries. The conventional air conditioners operate at the pressure required for maximum heating- and coolingdemand; while the Yokogawa Electric, a Japanese manufacturer, has developed a simple and low-cost, low-risk control mechanism that would eliminate wasteful use of energy. This innovation has been commercialized with the brand name Econo-Pilot, which controls the pumping pressure of air-conditioning systems in a sophisticated way and can reduce annual pump power consumption by up to 90%. Econo-Pilot HSP controls primary pumps and cooling water pumps for heat sources in water circulation systems such as central air-conditioning (Onishi et al. 2010).

8

ECO-INNOVATION AND TECHNOLOGY

215

Frugal innovation is the process of reducing the complexity and cost of products by taking cost-effective measures in manufacturing and following economies of scale. Usually this refers to removing conspicuous features from products, such as an automobile, in order to market it in bottom-of-the-pyramid markets and emerging markets. Designing products for such markets may also call for an increase in sustainability of innovative product, and selling through modern routes to market. However, profits earned on frugal innovations are much lower than high value-high technology innovative products targeted to the up-front or premier markets. The user-driven innovation conforms to the consumers’ needs, and would help them realize its value at relatively lower costs. Accordingly, firms can ‘refresh’ innovation policy to embrace user-driven innovation and encouraging user-driven innovation against high costcomplex market innovations (Martin and Milway 2012). Firms in many industries feel immense pressure to improve their ability to innovate consumer-centric products and services. However, managers know that the best ideas aren’t always coming out of their own research and development laboratory. Hence, a growing number of companies are exploring the idea of open-market innovation, an approach that uses tools such as licensing, joint ventures, and strategic alliances to bring the benefits of free trade to the flow of new ideas (Rigby and Zook 2001). Successful innovation companies should have the following attributes: • Systematic collection of internal and external (crowdsourced) information that could lead to innovation, • Screening information for economic viability and technological feasibility for developing prototype, • Analyzing the functionality of eco-innovation and its adaptability, • Creativity of employees and stakeholders, • Economics of converting an innovation idea, social values, and expected value for money, • Cocreation opportunities by within the broad framework of stakeholders, society, and public policies, • Project-based approach in developing eco-innovations and ability to manage projects with public–private partnership, social or state governance, and entrepreneurial wisdom, • Cooperation with external experts, • Ability to take appropriate measures of risk-taking,

216

RAJAGOPAL

• Drive employees’ motivation (the employees should be willing to improve the product and the operation of the whole company), • Ensure the opportunity of continuous learning among employees, stakeholders, and market players, and • Ability to commercialize eco-innovations in the mass markets and industrial market segments. Open innovation is a model that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, with the advancement of technology application in developing innovative products. The concept of open innovation emphasizes that knowledge on new ideas, products, use values, and innovation are wide spread in the world and it is not possible for the companies to explore this wealth to their fullest capacity. However, business ideas, concepts, and innovation processes are licensed from other companies. In addition, firms can take the internal inventions, not being used in their business, outside the company to get them licensed and earn royalty by selling them to client organizations. Most companies that intend to use open-market innovation apply tools such as licensing, joint ventures, and strategic alliances to bring the benefits of free trade to the flow of new ideas. Industrialization has been debated since long from various perspectives—social, economic, and political. Over time, the technology growth has added new dimension to the manufacturing and services industries. The Industry 4.0 movement with digital revolution has further enhanced the scope of economic contribution of industries. However, in the chronological journey of industrial growth, industries have merged as a para-civilization with the concepts of corporate citizenship status. Human society and ecological system have led to steep contradictions between human civilization and nature. The industrial growth, despite economic benefits, have depleted resources and degraded ecological environment endangering social health and quality of life. The basis of sustainable development is modifying the conditions of industrial civilization. The rise of social consciousness would contribute to the environmental consciousness in the industrial sector. Public demonstration projects are used to promote the upgrade of China’s green manufacturing technology to accelerate innovation as a catch-up instrument to manage sustainable development and transitions in the industrial concerns on sustainability (Zhao et al. 2015).

8

ECO-INNOVATION AND TECHNOLOGY

217

Manufacturing industries are bouncing over the global environmental challenges. However, their future contributions are subject to the rate of adaptation and integration of the eco-innovative approaches best suited to their production patterns. This approach requires a debate on the broad perspective of diffusion of awareness on sustainability of manufacturing and the underlying focus on potential eco-innovative solutions to reduce environmental impacts. In addition, industries must recognize that the main features of any innovation are determined early in the innovation process. The benefits are integrated within broad solutions on environmental aspects (Reid and Miedzinski 2008). However, eco-innovation can be environmentally motivated through social organizations and public policies along with the considerations on reducing production costs. Managing institutional changes in values, knowledge, norms, and administrative actions would attract collaborations with new stakeholders. The impact on technologies for eco-innovation depends on their social adaptation and creation of market demand. Creating demand, therefore, requires identifying a suitable market with sufficient policy support to foster their initial uptake. The mainstream market prefers to adopt new innovative technologies once they are ‘proven’ and endorsed by the consumer. Frugal Innovation Frugal innovation has opened up a new entrepreneurial landscape at the niche business level, where start-up enterprises, and small and medium firms cocreate low-cost innovations with limited resources. The markets for such innovations are limited to consumers of confined areas; therefore, they remain underserved with the frugal in low-income countries. The production of low-cost innovative products usually is small in volume due to the resource limitation. Consequently, despite its utilitarian values, the availability of such products largely remains obscure. Frugal innovations tend to create new markets and contribute to sustainability. They evolve discretely with the social needs or with the entrepreneurial interest, and diffuse in small geo-demographic segments in emerging markets. Frugal innovations also seek to identify what triggers and motivates individuals to engage in consuming such unbranded and less commercialized innovative products (Hossain 2020). Small firms start their business in a niche, and try to achieve perfection in business by serving the consumer segment within the geo-demographic

218

RAJAGOPAL

limits. Most firms initially monopolize their market with their innovative products in a niche, and cocoon their marketing strategies blocking the entry of new firms in the niche. Operating on economies of scale for a large firm for commercializing the innovation-led products delivers competitive advantage significantly to the consumers at lower costs, which may further lead to the price leadership in the marketplace. On the green business innovation front, the idea of solar charger consumer electronics has grown the market demand. The Window Solar Charger brought out in the market by several competing companies in the niche can be used to power the smartphone through sunlight from the window. The charger is a rechargeable lithium battery that holds 1400mAh of electric charge. This device delivers completely green energy, as it is all collected through solar panels on the window-facing side of the device. Most innovations are grown in the emerging markets around the ethnic needs of consumers, and are developed at low cost considering the affordability and adaptability potentials of the consumers in the home market. Frugal innovation is based on the substantial cost reduction, concentration on core functionalities, and optimized performance level. The concept of frugality is a more a formative economic construct than a business model, which encompasses the following dimensions (e.g. Rajagopal 2014): • Quality integrated in the product with the basic assumption of utilitarian values, • Cost of production, consumption and value for money concepts, • Simplicity in product design, functions, and management, and • Sustainability orientation of the product. The low cost and sustainability of the frugal innovation products are considered within the value perspectives of consumers. Frugal innovations promoted by the regulatory bodies and policy makers sometimes ignore the consumers within sustainable innovation, which causes the failure of innovation marketing efforts (von Janda et al. (2020). Often, such innovations developed for niche markets are commercialized by the large companies and are modified to fit into the extended geodemographic market segments. Small start-up enterprises that emerge with new business innovation ideas and projected performance in business, often suffer from low entrepreneurial confidence due to cost- and time overrun syndrome of innovation, or ending up the innovation

8

ECO-INNOVATION AND TECHNOLOGY

219

in a niche with less obvious performance of the project. Hence, the large companies are coming forward to adopt start-up enterprises, build required entrepreneurial attributes among the start-up innovation project teams, monitor the stage-wise performance of the innovation project, and meticulously work-out the investment-return ratio on innovative business projects. In developing countries, the local governments and social organizations are stimulating entrepreneurship and innovation, and are consequently shaping the market competitiveness of their respective region. The growing concerns on sustainability has coupled with innovation entrepreneurship. However, in the recent past, the concept of social governance for sustainable development projects has been very much in vogue with respect to the social activists and political decision-makers (Omri 2020). The innovation entrepreneurship, which grows in the family business, largely operates in a niche as such entrepreneurs are not pro-open innovation. The entrepreneurial focus in a family run environment does not always stay progressive, it is rather confined into a streamlined segment with low commercial vigor. The start-up enterprises are largely involved in sprouting new ideas and bringing out the prototypes with testing in the niche markets attracting sponsors for global commercialization. Innovations of some small companies that emerge in a niche are able to radically change their entrenched ways of serving the large markets and claim leading transformation in the market. Even less common are the companies that are able to anticipate a new set of requirements and mobilize the internal and external resources necessary to meet the innovation transformation process. Few companies make the transformation from their market-oriented business innovation model to a customer-centric innovation management model, which delivers the innovation to the consumers in a sustainable way with high level of satisfaction. Innovation transformation typically begins at the niche market searching a way forward to create a new consumer segment to sustain by developing a temporary monopoly situation. Most companies develop new dynamic capabilities deliberately to manage the innovation transformation and market management process. Companies that transform the innovations to the consumer preferences gain fundamental advantages over the competitors toward building marketing alliances of branding and distribution, creating experiential marketing challenging in business against conventionally operating competitors, and nurturing strategic changes in consumer behavior (Johnson et al. 2012).

220

RAJAGOPAL

Social Marketing Social networks also help firms go sustainable by building loyalty and trust in corporate policies. Successful sustainable enterprises in developing countries often involve informal networks that include businesses, non-profit organizations, and local communities. These networks prompt the firms to go for investments in the financial-, social-, human-, and ecological capital areas. Successful sustainable networks require business enterprises to sponsor for ensuring the network’s financial sustainability and serve as an anchor of the company. Multinational corporations sometimes support social networks to anchor with specific operational objectives (Wheeler et al. 2005). Google has taken a developer-centric focus around the products it builds. It has encompassed this philosophy in the knowledge dissemination vision of the company to figure out the challenge around social product design within the organization. Accordingly, Google proceeded to create a new network-Google+ , to get the entire organization reveal out the real relationships their users have. Such integrated platform, which emerged as a product design strategy of the company, has also facelifted the Google product line and its application. Other companies should also be considering this approach in their organization and may go beyond the role of a corporate social strategist. While developing social alliances by the companies, streamlining the discussions on social platforms is a significant task for the managers. The flow of communication from the social networks on predetermined platforms, and the proactive, reactive, and interactive exchange of information can be strengthened by nurturing cooperative relationships in several ways. An effective corporate collaboration with social networks should be built at pyramidal hierarchy comprising top management to develop broad goals and monitor progress, middle managers to develop charter of collaborative activities with social networks, and at the bottom of the organization operational personnel to get involved with the community while carrying the routine tasks. Integrating the social communities in the corporate strategy and operational activities would build the organization stronger (Hutt et al. 2000). Social marketing is an approach to develop socially beneficial behavior for community-oriented products and services. In this context, social marketing is a concept of cocreation, and has been explored in a number of social marketing examples from marketing of birth-control contraceptives to renewable energy and water conservation products for the social

8

ECO-INNOVATION AND TECHNOLOGY

221

benefit. Cocreation is the process of customers and producers determining value together, where customers are engaged at all levels of value proposition and market transaction. Value, cocreated in the social products and their marketing to customers, relies on the belief that customers are proactive to the social innovations and their applications (Desai 2008). The social networks, composed of innumerous groups of consumers worldwide that are attempting to address critical social and marketing needs, have long been regarded as not compatible for the companies in guiding their business. The profit-oriented customer-centric companies now have an opportunity to collaborate with social networks to create new markets for reaching the four billion people who are not yet part of the world’s formal economy. The power of such collaborations lies in the complementary strengths of the partners including scale of manufacturing, financing, and retailing. Social entrepreneurs offer lower costs, strong social networks, and deep insights into potential customers and communities, and set up hybrid value chain. This framework may be defined as the hybrid value chain. For example, Elektra a consumer durables retail company in Mexico, initially aimed at the customers at the bottom-of-the-pyramid, and is now expanding and monitoring its market by associating social networks. The company expanded its business in USA and other countries in Latin America. It is operating as an innovative project aimed at meeting the needs of families of relative lower socio-demographic profile (Drayton and Budinich 2010). Firms, irrespective of their size, are leaning toward nurturing the strategic alliances using social networks to gain competitive advantage. The cooperative relationships are driven by the firms to excel in their competencies, safeguard resources and share risks, be dynamic to get into new markets, and create attractive options for future investments. However, many alliances fail to meet expectations because nurturing the working relationships and interpersonal connections that tie the partnering organizations with consumer community are not considered by the companies seriously. Such company-consumer personal relationships serve to shape and modify the evolving public–private partnership and help in building corporate social image. In making the social network alliance effective, the dedicated function coordinates all alliance-related activity within the organization and is charged with institutionalizing processes and systems to teach, share and leverage prior alliance-management experience and know-how throughout the company (Dyer et al. 2001). While developing social alliances by the companies, streamlining the discussions

222

RAJAGOPAL

on social platforms is a significant task for the managers. The flow of communication from the social networks on predetermined platforms, and the proactive, reactive, and interactive exchange of information can be strengthened by nurturing cooperative relationships in several ways. An effective corporate collaboration with social networks should be built at pyramidal hierarchy comprising top management to develop broad goals and monitor progress, middle managers to develop charter of collaborative activities with social networks, and operational personnel at the bottom of the organization to get involved with the community while carrying the routine tasks. Integrating the social communities in the corporate strategy and operational activities would build the organization stronger (Hutt et al. 2000). Building business with the consumers is complex. However, customercentric companies need to team up with other organizations in the community to drive the business effective. It is necessary to figure out which organizations have similar goals and identify ways to collaborate. The social marketing programs can do better in motivating individual behavior change, but that is difficult to sustain unless the environment sustains for the long run. Often, a policy-change in developing alliance with social networks is needed for the firms, and media advocacy programs can be developed as an effective complement to a social marketing program. The issues addressed by social marketing programs are intervened by the local politics or pro-community organizations to gain social support. For example, a health care company may involve social networks to disseminate knowledge about breast cancer, and diagnosis and treatments associated with it. Though this issue might be raised by the health care company as a social marketing debate, it also appears to be an issue to be addressed by the local non-governmental organizations and the local politics. Hence, this product in a social network could attract any of these behaviors- getting an annual mammogram as a mix of social-commercial issue, seeing a physician each year for a breast exam as a matter of social health care programs offered by the local public governance, and performing monthly breast self-exams as an issue associated with social education (Rajagopal 2013). First-time social marketers often feel overwhelmed by the rigorous market research processes they see in other large-scale programs. They may hesitate to incorporate social marketing activities into their own

8

ECO-INNOVATION AND TECHNOLOGY

223

programs, unsure whether they have the resources and expertise to undertake such a project. The following approaches would help the companies to understand the fundamental operatives of the social marketing (Rajagopal 2013): • The key to effective social marketing is conversing and listening to the people that the company is trying to reach. Social marketing is a customer-driven process and all aspects of marketing program must be developed considering the needs of the target audience as the central focus. In order to learn what customers want, it is necessary to make them express. • Good marketers know that there is no such thing as selling to the general public. Consumers respond differently to particular approaches and to be most effective, audiences may be segmented into homogeneous groups and create messages specifically for each segment. The communications should be rendered precisely to the target groups analyzing information about their needs and perceptions about the products and services. A company may also segment the consumer on the basis of their attributes on the knowledge about the product. For example, a new taste of food may be targeted to the segment who never tasted the specific food instead of to those who had experienced. However, people still vary greatly within these segments; but the more specific it can get, the greater will be the potential impact. • In social marketing products are often hard to promote because of their high price. Products that need to be cultivated in the attitude of consumers require long-term commitments and do not sell as easily as a bar of soap or a car. The product positioning determines how the target audience thinks about product as compared to the substitutes. The company may develop the promotion strategies and reinforce the attributes of the products that add to the perceived value of the consumers. • In the commercial sector, successful companies watch every move their competitors make. They know their selling environment intimately and are ready to react as soon as conditions change. Social marketers also need to be aware of the competing messages pulling on their target audiences. Just as Coke creates its marketing strategies based on what Pepsi is doing, companies can take advantage of their competitors’ tactics to promote their own products. Many successful

224

RAJAGOPAL

campaigns against tobacco and alcohol have satirized the well-known cigarette and beer slogans, creating ads that grab our attention because of their new twist on familiar images. Other environmental factors may also affect people’s reactions to the promotion campaigns and sales program. • People will not go out of their way to find corporate messages or promotion bulletins. The messages need to be put in places that can be accessed by target audience. While conversing with the potential consumers on the social network platforms they should be tinkled to reveal where they get their news, what radio stations they listen to online, and where they go in their free time. In case the target audience tends to read the local newspaper, it would be the right way to place the communication there and work with that paper’s reporters to get coverage of the issue. • Social marketing involves much more than television advertising campaigns. The most effective programs use a combination of mass media, community, small group, and individual activities. When a simple, clear message is repeated in many places and formats throughout the community, it is more likely to be seen and remembered. A social marketing program might contain Internet blogging platforms and radio spots, community event, a poster contest, giveaways of products or coupons, and a toll-free hotline for individual counseling or referrals on the products and services of the company. • It is important for the companies to know that consumers do not buy products in true sense, they buy solutions. Hence, the company should learn the problems lying with the consumers through the social networks before presenting the products. A social media activist may have a mix of experience with product design, marketing, software applications, and the extended of reach of the communication. Companies should analyze consumer experience centered on social interactions to develop community linked marketing approaches. Such consumer connectivity helps the managers to stay on the social media platforms like Facebook Page, and work with the social media account management, social advertising, and social media campaign management, that are the typical consumer-centric marketing tasks for a company. As the social networks are growing fast and gaining the psychodynamics, there emerges a need for a new executive-level as social marketing strategist, who can fully embrace a focus on social

8

ECO-INNOVATION AND TECHNOLOGY

225

marketing. Companies should develop social media strategies on the basis of Hub and Spoke model, where a hub is located around social media. The hub may be led by the corporate social strategist to monitor the core communication movements within the networks and draw a framework of marketing strategy integrating consumer attributes and corporate policy. The hub marketing framework need to be further converged with the functionaries accountable in various departments of the company that denotes spokes in the model (Rajagopal 2013).

Branding Eco-Innovations Brands have grown wild by the early twenty-first century in the global markets due to bi-directional dynamics of companies from international to regional markets and vice versa. Most brands grown in global markets have been modified in their attributes and deliverables, and reassigned to suit the consumer preferences in varied destinations. Mergers and acquisitions have further added the risk of overlapping brands and their associated business values with the consumers within the brand portfolios. The relationships between brands and their customers have now become more open-ended as online discussions extend the brand experience after purchase. Multinational customer-centric companies manage their brand portfolios considering the following strategies to stay sustainable in the marketplace: Making brands distinctive: Companies develop strategies to deliver relevant, distinctive, and credible value to customers. They offer benefits and experiences of brands and differentiate them through superior positioning relative to competitors. Such strategies are also used in repositioning established brands to meet customer needs effectively. Optimizing brand portfolios and new designs: Companies launch new brands and sub-brands continuously to compete with their rivals and serve the changing preferences of consumers, which endangers the roles and relationships of brand assets within a portfolio. Such trends in branding pose major challenges to companies in consolidating brands, reducing value-based complexity, and brand-overlap. Brand designs should incorporate the 4As comprising attributes, availability, affordability, and adaptability. Delivering the brand promise at all touchpoints: Consumer-centric companies make greater efforts to deliver the brand promise at all touchpoints with the customer, both online and physical deliveries.

226

RAJAGOPAL

The current business and the modern multichannel environment drive companies to cocreate the brand value and deliver a consistent brand experience, and collaborate effectively with the consumers in implementing brand strategies. Supporting consumer decisions: Companies should be able to develop branding capabilities to guide consumers in making pro-brand decisions in response to the brand strategies of the company.

Companies in the competitive marketplace analytically measure their brand power and map current brand positions. Brand performance is commonly measured by the company in reference to the volume of sales stimulated by the effect of individual brand tactics within the brand portfolio. Skill needs to be acquired in positioning the brand against the competitors’ brand, and the brand line mapping is an important planning exercise to perform this task. Such an effort is also beneficial in identifying market segments according to the customer preferences. A brand is positively valued when the customer reacts more favorably to the marketing-mix of a brand with a known brand name, compared to an identical, yet, unbranded brand. Brand knowledge is conceptualized as an ‘associative network memory model’ consisting of two dimensions: brand awareness and brand associations in consumer memory. Positive customer-based brand equity occurs when the customer is aware of the brand, and holds strong, unique, and favorable brand associations in memory. Organizations tend to orient their scope of brand measurement based on their cultural approach to brand strategy. Based on self-identified brand centricity, the findings within this research suggest that there are three distinct organizational cultures associated with the measurement and management of brands; and the culture typifies the scope of measurement and management approaches used by an organization. Organizations pragmatically formulate its brand strategy, and tend to apply measures that focus on the effectiveness of its brand efforts from a communications and financial perspective. These organizations tend to apply a reasonably strong measurement framework involving the use of financial-based variables (to measure the financial impact of brand efforts) in addition to non-financial variables such as customer perceptions and behaviors (to measure the impact on customer actions and beliefs). An international firm should develop country-specific brand lines for achieving success in the overseas market. To achieve this goal, the composition of the brand line needs to be periodically reviewed and

8

ECO-INNOVATION AND TECHNOLOGY

227

changed. Environmental changes such as customer preferences, competitors’ tactics, host country legal requirements; and a firm’s own perspectives including its objectives, cost structure, and spillover of demand from one brand to another; can render a brand line inadequate. Thus, it may become necessary to add new brands or eliminate existing brands from the brand line, to customize the brand line specific to each country. Alternatively, certain specific brands may be developed for a particular foreign country with by collaborating with the brands of local companies. The extension of domestic brands to foreign markets follows the brand life cycle pattern. Such brand extensions are generally adopted through a process of consumer familiarization, wherein brands are developed first for the home market and upon their success lead to exports. Most consumer products companies drive their brands to penetrate in the marketplace without developing enough awareness about the brands among consumers and market players. Companies deploy such brands through offensive tactics. It has been observed that such brand marketing tactics help companies to successfully launch new products, enter new markets, and gain share over existing products in the local markets. However, in managing every new brand launch intending to build its market share, the brand should defend its position against the competing brands. The basic types of defensive brand marketing strategies include positive, inertial, parity, and retarding. The first two types of brand marketing strategies tend to establish and communicate the attributes of brand superiority in reference to brand features and values relative to the existing brands, while the other two categories of brand marketing establish and communicate competitive advantages and strategic gains in the long term as compared to the rival brands in the marketplace. Companies meticulously choose strategies to support identity of brands, and products and services, to develop an appropriate communication plan. As the brands are established in the market and gain high brand equity and customer value, they become vulnerable to the market competitors. New brand concepts are tested by the companies in reference to competition, brand attributes, and an appropriate group of target consumers. The concepts can be presented physically or symbolically. The consumers’ response may be summarized and the strength of the concept may be judged. The need-gap and brand gap levels may be checked and modified thereafter. The concept testing and brand development methodology applies to any brand or service. The business analysis includes estimating the sales, as it would be of one-time purchase brand, frequent

228

RAJAGOPAL

purchase brand, or at regular interval purchase brand. The estimates should also be made in relation to the tendency of the first purchase, replacement purchase or repeat purchase. Besides, the company should also assess the estimated marketing costs and the profits from commercialization of this brand. Frequent introduction of new brands also leads to instability in the brand management process as new brands are pushed piggybacked to temporary market demand, and companies commit high investments to sustain such brands against the fluctuating market demand. These brands are categorized as ‘agitating brands,’ which may also be recognized as boomer brands in a given time. To sustain with agitating brands, it is necessary for a company to make differentiation and add value to the brand. Such distinction is necessary in the brand architecture approach for overcoming any conflicts in defining the role and level of the brands. The categories of brands play significant role in the process of brand architecture for a firm in the following ways: • • • •

Creating coherence and effectiveness Allowing brands to stretch across the products and markets Stimulating the purchase decisions by brand drivers Targeting market niches and benefits positioning

Building tensile brands has become a marketing priority for many firms. The presumption is that building a tensile brand yields a number of marketing advantages. Strength of such brands drives loyalty in various ways and creates differential responses by consumers to various marketing activities, which would help in building brand equity in the long term. Positioning innovative products and services with conventional wisdom makes a company competitive is a myth in the present state of global marketing. Thus, firms continually reinvent strategies in reference to the shifts in market demand and the changes in the economy. They develop competitive marketing strategies considering the changes in the productand market behavior, knowledge of innovative products, and positioning innovative brands. Most companies engage in developing breakthrough brands, however, some have been able to come up with a formal process for fostering innovation-led brand management. The biggest challenge in managing breakthrough brands seems to be generating high brand equity

8

ECO-INNOVATION AND TECHNOLOGY

229

in short span. Such brand management approaches need real time marketbased competitive thinking and creative insights that can reveal new approaches to make the brand sustainable in the competitive marketplace. Innovation and brand integration are two compelling sources of growth in a dynamic competitive marketplace. The ability to coordinate across organizational boundaries largely appears as a critical factor in determining the speed and life cycle of a market-driven innovation. Innovations need to be integrated into the larger operations of the corporation to the extent that is enough to show a prolific impact on business and sustainability in the marketplace. Many large businesses spend resources on innovations but fail to capitalize on them. However, some organizations use innovations to optimize local operations rather than integrating them to create consumer value and corporate image. Many companies develop product positioning strategies in association with customers, which leads to a customer-centric business strategy. Codesigning activities are performed at dedicated interfaces, and they allow for the joint development of products and solutions between individual customers and manufacturers (Berger et al. 2005). Knowledge sharing through face-to-face communication is positively related to both product and financial performance, while technological knowledge sharing has a positive impact on product performance under the conditions of high technological dynamism. Supplier involvement in the buying process is related to product- and service performance, while use of knowledge management tools is related to financial performance. Customer-centric research aims at developing pro-customer strategies to focus on better ways of communicating value propositions and delivering the complete experience to real customers. Learning about customers, experimentation with different segmentations, value propositions, and effective delivery of services get customers associated in business and help frontline employees acquire and retain customers with increasing satisfaction in sales and services of the firm (Selden and Macmillan 2006). Many manufacturers establish brand development activities in different countries through colocation of cross-functional teams to foster collaboration among engineering, manufacturing, and supply chain functions. Such inter-departmental integration helps companies develop better product designs, faster time to market, and lower cost of production. Some multinational companies like Hewlett-Packard, Eastman Kodak, Hyundai Motors, Haier, Alcatel, and Cummins have demonstrated the success of such integration of activities in developing customer-centric products

230

RAJAGOPAL

and corporate relationships with the market players and alliance partners (Eppinger and Chirkara 2006). Most companies position their brands by identifying the right consumer segments and appropriate time of launching the brands. However, the key points to be considered in brand positioning include: • • • •

Brand differentiation Unique sales proposition Psychographic segmentation Cognitive attributes-motivation, impulse, emotions, and perceived value • Brand communication • Brand relationship • Brand-related marketing-mix elements (11 Ps) including product, price, place promotion, packaging, pace (competitive dynamics), people (brand relationship), performance (brand line performance), psychodynamics (word-of-mouth), posture (corporate brand image), and proliferation (brand extension) In the past, brands were either global through a central strategy, or they were much decentralized. The former was more efficient but insensitive to local conditions, the latter far more sensitive but less able to take advantage of economies of scale. In the 1990s, a greater degree of localization was observed, whereby a brand conforms to a central strategy that can be adapted locally. This tends to be more efficient and responsive to local market opportunities and needs. Brand consumption tends to be local. The process of branding in the international context consists of finding an appropriate match of host country objectives with the corporate objectives to determine how to conduct business in the host country. The brand objectives of a product should be derived from the corporate focus of the company. The firm sets the brand objectives accordingly and decides the type of products to be offered in the host country. The marketing-mix factors comprising product, price, place, promotion, packaging, pace (market dynamics), people (sales force), performance, and psychodynamics (buying appeals) are developed interlinking the attributes of the brand to help in its positioning. The common goals of a new brand are oriented toward stability, growth, profits, and returns on investment. Most multinational companies develop differentiated brands efficiently,

8

ECO-INNOVATION AND TECHNOLOGY

231

make their manufacturing processes flexible, and achieve higher market share. These firms attain higher brand strength in the market as they focus on developing one product at a time and share components and production processes across a platform of products. Brand conceptualization is widely accepted as a key activity in developing the right product markets. In brand conceptualization, customer requirements play a crucial role. In the competitive and globalized business environment, the decisive factor for a company is its ability to incorporate customer preferences in new brands to out-perform its competitors. Brand ideas must be turned into concept and product concept can be turned later in to the brand concept. Brand concepts can be presented physically or symbolically in the product. Consumers’ response on the developed brands may be summarized and the strength of the concept may be judged. The need-gap and product-gap levels may be checked and modified thereafter. Concept testing and product development methodology apply to any product or service. Brand analysis includes estimating the sales as it would be of one-time purchase, frequently purchased product or regular interval purchase product. Estimates should also be made in relation to the tendency of first purchase, replacement purchase or repeat sales. Besides, the company should also assess the marketing costs and the profits from commercialization of this product.

References Armitage, D. (2005). Adaptive Capacity and Community-Based Natural Resource Management. Environment Management, 35(6), 703–715. Berger, C., Möslein, K., Piller, F., & Reichwald, R. (2005). Co-designing Modes of Cooperation at the Customer Interface: Learning from Exploratory Research. European Management Review, 2(1), 70–87. De Meyer, A. (2011, September 15). Diving into the New Innovation Landscape, IESE-Insight Magazine. Dennis, M., & James, P. (2018). Urban Social-Ecological Innovation: Implications for Adaptive Natural Resource Management. Ecological Economics, 150, 153–164. Desai, D. (2008). Role and Relationship Management and Value Co-creation in Social Marketing. Social Marketing Quarterly, 15(4), 112–125. Drayton, B., & Budinich, V. (2010). A New Alliance for Global Change. Harvard Business Review, 88(9), 56–64.

232

RAJAGOPAL

Dyer, J. H., Kale, P., & Singh, H. (2001). How to Make Strategic Alliances Work. Sloan Management Review, 42(4), 37–43. Esfahbodi, A., Zhang, Y., Watson, G., & Zhang, T. (2017). Governance Pressures and Performance Outcomes of Sustainable Supply Chain Management—An Empirical Analysis of UK Manufacturing Industry. Journal of Cleaner Production. 155, Part 2, 66–78. Eppinger, A. D., & Chirkara, A. R. (2006). New Practice of Global Product Development. MIT Sloan Management Review, 47 (4), 22–30. Gary, L. (2003). Ambidextrous Innovation. Boston: Harvard Business School Press. Geels, F. W. (2005). Technological Transitions and System Innovations: A Coevolutionary and Socio-technical Analysis. Cheltenham, UK: Edward Elgar. Haanaes, K., Michael, D., Jurgens, J., & Rangan, S. (2013). Making Sustainability Profitable. Harvard Business Review, 91(3), 110–115. Hossain, M. (2020). Frugal Innovation: Conception, Development, Diffusion, and Outcome. Journal of Cleaner Production, 262, 1-10. Hutt, M. D., Stafford, E. R., Walker, B. A., & Reingen, P. H. (2000). Defining the Social Network of a Strategic Alliance. Sloan Management Review, 41(2), 51–62. Johnson, D. S., Clark, B. H., & Barczak, G. (2012). Customer Relationship Management Processes: How Faithful Are Business-to-Business Firms to Customer Profitability? Industrial Marketing Management, 41(7), 1094– 1105. Kotilainen, K., Saari, U. A., Mäkinen, S. J., & Ringle, C. M. (2019). Exploring the Microfoundations of End-User Interests Toward Co-creating Renewable Energy Technology Innovations. Journal of Cleaner Production, 229, 203– 212. Martin, R., & Milway, J. (2012, September). User-Driven Innovation: Putting an End to Inventing in the Dark (Working Paper). Rotman School of Management. McDonough, E. F., Zack, M., Lin, H. E., & Berdrow, I. (2008). Integrating Innovation Style and Knowledge into Strategy. Sloan Management Review, 50(1), 53–58. McLaughlin, P., Bessant, J., & Smart, P. (2008). Developing an Organization Culture to Facilitate Radical Innovation. International Journal of Technology Management, 44(3), 298–323. Molle, F., López-Gunn, E., & van Steenbergen, F. (2018). The Local and National Politics of Groundwater Overexploitation. Water Alternatives, 11, 445–457. Nambisan, S. (2010). Virtual Customer Environments: IT-Enabled Customer Co-innovation and Value Co-creation. In Information Technology and Product

8

ECO-INNOVATION AND TECHNOLOGY

233

Development—Annals of Information Systems (pp. 109–127). New York: Springer. OECD. (2009). Sustainable Manufacturing and Eco-Innovation Synthesis Report Framework, Practices and Measurement. Paris: Organization for Economic Cooperation and Development. Omri, A. (2020). Formal Versus Informal Entrepreneurship in Emerging Economies: The Roles of Governance and the Financial Sector. Journal of Business Research, 108(2), 277–290. Onishi, T., Miura, H., & Kobayashi, S. (2010). Econo-Pilot HSP Energy-Saving System for Heat Source Water Pumps: Reducing Electricity Consumption and CO2 Emission in the Pump (English Edition). Yokogawa Technical Report, 53(1), 27–30. Pol, E., & Carroll, P. (2006). An Introduction to Economics with Emphasis on Innovation (2nd ed.). NY: Thomson Learning. Rajagopal. (2013). Managing Social Media and Consumerism: The Grapevine Effect in Competitive Markets. Basingstoke, UK: Palgrave Macmillan. Rajagopal. (2014). Architecting Enterprise: Managing Innovation, Technology, and Global Competitiveness. Basingstoke, UK: Palgrave Macmillan. Rajagopal. (2015). Butterfly Effect in Competitive Markets: Driving Small Change for Larger Differences. Basingstoke, UK: Palgrave Macmillan. Reid, A., & Miedzinski, M. (2008), Eco-Innovation: Final Report for Sectoral Innovation Watch. Brighton: Technopolis Group. Rigby, D. K., & Zook, C. (2001). Open-Market Innovation. Harvard Business Review, 80(10), 80–89. Selden, L., & MacMillan, I. C. (2006). Manage Customer-Centric Innovation Systematically. Harvard Business Review, 84(4), 108–116. von Janda, S., Kuester, S., Schuhmacher, M. C., & Shainesh, G. (2020). What Frugal Products Are and Why They Matter: A Cross-National Multi-method Study. Journal of Cleaner Production, 246, 118977. https://doi.org/10. 1016/j.jclepro.2019.118977. Wheeler, D., McKague, K., Thomson, J., Davies, R., Medalye, J., & Prada, M. (2005). Creating Sustainable Local Enterprise Networks. MIT Sloan Management Review, 47 (1), 33–40. Zhao, W., Jeong, J., & Noh, S. D. (2015). Energy Simulation Framework Integrated with Green Manufacturing-Enabled PLM Information Model. International Journal of Precision Engineering and Manufacturing Green Technology, 2(3), 217–224.

CHAPTER 9

Social Entrepreneurship and New Business Trends

Most social enterprises follow innovation-based growth model with collective social capital that influences social innovation and consequently economic growth. Social capital stimulates innovation activities, which leads to higher profits if appropriately commercialized. Such market-led innovation results into higher social capital and reinforcing social benefits and values. This chapter focusses on drawing contemporary explanations to social needs, social innovations, and organizational performance of social enterprises. The future business trends are also discussed in this chapter in the context of social entrepreneurship. This chapter discusses how contemporary social and technological developments would help the upcoming businesses in generating opportunities to combine resources, reach markets, and create community value.

Social Entrepreneurship Social enterprises are community-conscious organizations evolved within the social framework, which address cocreation of solutions to a predetermined social need or a problem. Among many social problems in the urban-rural environment, sustainable housing, green energy, natural resources management, transportation and logistics, and poverty alleviation are some primary areas for social enterprises to work with. Social enterprises are evolved with stakeholders to serve the urban and rural demographics, which also serve the underprivileged consumers in a weak © The Author(s) 2021 Rajagopal, Sustainable Businesses in Developing Economies, https://doi.org/10.1007/978-3-030-51681-9_9

235

236

RAJAGOPAL

regulatory framework. In emerging markets, customers and members of social enterprises at the bottom-of-the-pyramid are targeted for the basic benefits and services such as healthcare, education, and farm and nonfarm activities. Social entrepreneurs use innovative business models to build solutions with the available resources and offer basic services to the stakeholders in a sustainable way. The principal objective of social enterprises is to create social impact and generate economic and social values in a sustainable manner (Mair et al. 2007). An appropriate example of the social enterprise that influences customers by stimulating an emotional response can be of the Goodwill Industries International Inc. in the USA, which operate on the thrift objectives to provide clothing and domestic necessities at marginal prices through Goodwill stores. In addition, the Goodwill organizations also bring employment opportunities for at-risk individuals, job training and other community-based programs to help the people who are somehow prevented from getting a job. The Goodwill organizations have adapted making a successful transition to ecommerce in 2007 from brick-and-mortar to online shopping. They are now marketing vintage gold jewelry, designer handbags and mid-century musical instruments online. Social entrepreneurship is emerging as a principal move toward sustainable development through volunteerism and civic commitment. The critical difference between social and traditional entrepreneurship can be seen in delineating the social mission and the market. Social entrepreneurs emphasize on ways to produce progressive social business or public properties (Heeks et al. 2014). Social entrepreneurship has high value proposition and intended to drive societal transformations. Such entrepreneurs address social issues and problems and empower transformational progress throughout the system. The dominant factor for the rise of social entrepreneurship is the societal pressure on green recovery and sustainability governance (Gandhi and Raina 2018). Another successful and impactful social enterprises is ME to WE that provides Fairtrade products and global volunteer trips to a mostly millennial audience. It was launched in 2006 by two Canadian brothers and has grown rapidly. The enterprise allows consumers to enter a unique code from ME to WE products to transparently see exactly how and where the funds from their purchases are used for the needy people to transform lives by providing financial support on various vital requirements. Most SME entrepreneurs develop design-to-market strategies in view of the lessons learned from market competition and their experience

9

SOCIAL ENTREPRENEURSHIP AND NEW BUSINESS TRENDS

237

in managing niche market strategies. The design-to-market strategies, over time, become a common practice as entrepreneurial marketing. Accordingly, entrepreneurs follow bottom-up approach by choosing the target market or segment in the beginning, and later explore the needs and demands of their targeted segment through personal relations to serve them efficiently (Stokes 2000). The entrepreneurial marketing approach involves cost-effective activities by avoiding formal market research or involving mass promotions strategies to promote business. However, entrepreneurs of small and medium business segment significantly depend on their personal networks to collect information about consumers and the market. These entrepreneurs heavily use consumer psychodynamics and the interpersonal communication such as word-of mouth to promote their products and services (Copley 2013). The social facet of entrepreneurship education has closer proximity to innovation diffusion and business modeling than the formal teaching pedagogy or regulatory education to entrepreneurs. Though regulatory and social environment resources are external to entrepreneurship education, they can be purposely integrated and aligned with the entrepreneurial touchpoints to expand and enhance customers’ journeys, customer experience, and marketability of their products or services in the emerging markets (Homburg et al. 2017). Social entrepreneurship can be seen as a procedure of generating worth by integrating resources in novel way and is regarded as a process involving the contribution of services and products. Social entrepreneurs are categorized by their behaviors of social management skills, dynamics in achieving predetermined goals, and ethical strategies (Mair and Marti 2006). Traditional approaches to social enterprise strategy of both startup enterprises and large companies assume that the social behavior and values are relatively stable and predictable. However, new technologies, and greater transparency have combined to achieve the social business goals on sustainability. Such shift in the business environment has generated more risk and vulnerability among social enterprises in engaging with new innovative projects. Social enterprises that thrive to follow the integrated innovation strategies, as discussed above, can alter the consumer behavior quickly and manage the market demand. These enterprises experiment rapidly and frequently with products and services as well as business models, processes, and strategies, to achieve a sustainable market for innovative product. Innovation entrepreneurship is a convergence of start-up enterprises and the sponsoring companies, which moves

238

RAJAGOPAL

from the stage of initiation to the systematic project management to commercialization, and finally developing sustainable innovation through incremental innovations. Companies need to invest substantial resources toward consumer education in order to create consumer demand. Besides, they also have to carry out product demonstrations such as ‘do-it-yourself’ and adaptive customization by allowing consumers to use the new products for a reasonable period and perceive value for money associated with the products. However, the opportunities for open innovation, incremental innovation, and enhancement of the use value of innovative products over the stages of product life cycle finally take the innovation business projects to the initiation stage of the next generation innovative products. Opportunity-led entrepreneurship grows in the region as entrepreneurs look for alternate work options, but still decide to pursue a government promoted business opportunity that offers economic benefits such as capital and infrastructure subsidies, and tax advantages. It is a key construct in understanding the entrepreneurial abilities in a country better as compared to the necessity driven entrepreneurship (Acs et al. 2008). Most small enterprises have succeeded in developing up-stream markets in organic apparel from Asian countries like India, Bangladesh, Indonesia, and Korea. The growth of consumer concern on sustainability and technology has developed dynamic synchronization with the industry today and is converging fast, leading to quick adaptations of local products in global markets. The globalization of customer requirements is resulting from the identification of worldwide customer segments of homogeneous preferences across the territorial boundaries. Business-to-consumers and Business-to-business markets are powered by the consumer demands from the global companies, as they are perceived more value-oriented and of added benefits. Innovation and technology played a pivotal role in opening the global avenues for the regional firms. One of the legendary social enterprise, which is a stand-alone example, can be the Grameen Bank (rural financing institution) experiment of Bangladesh. This enterprise has emerged initially as a self-help group for catering to the grassroot financial needs of the people. This organization aimed at serving the poor ad needy members of this social institution who wanted credit (loan) for farm or non-farm production or services activities. Commonly, poverty spans into generations in developing countries due to vicious cycle of low-income and disguised unemployment. Consequently, people fail to break the cycle of poverty in the short term. The

9

SOCIAL ENTREPRENEURSHIP AND NEW BUSINESS TRENDS

239

credit system in the Grameen Bank is based on a survey of the social background rather than on a pre-established banking technique, which provides required information to develop a long-term process depending on the aspirations and commitment of the stakeholders and economic operators. In this social enterprise, the credit system serves the poor, and not vice versa, therefore, credit officers visit the villages to get to know the borrowers. The focus of operations is on those poverty-stricken people, needing investment resources as they have no access to credit. The institution leans on solidarity groups that are small informal groups consisting of coopted members coming from the same background and trusting each other. In addition, savings are associated with credit, without it being necessarily a prerequisite. In view of the above successful experiment of Bangladesh Grameen Bank, it can be stated that social enterprises tend to alleviate social problems with an objective to run sustainably and any profits must be reinvested in the enterprise rather than funneled back to shareholders. Unlike a low-cost business, a social business determines up-front actions to those eligible and strives to maintain high quality of deliverables (Yunus et al. 2015). Incubation of innovations has emerged as a new model of start-up facilitation in most developing economies. Venture capitalists review the incubators and assess the projected growth and profitability in businesses to invest. They review the incubators to diversify risky investment portfolios, while the prospecting entrepreneurs approach the incubators to review the economically viable and technologically feasible support for start-up projects. Entrepreneurial incubators face both challenges and opportunities to grow into competitive enterprises considering the embedded investment and entrepreneurial risks. Broadly, there are five incubator archetypes such as the university incubator, the independent commercial incubator, the regional business incubator, the company-internal incubator, and the virtual incubator (Carayannis and von Zedtwitz 2005). An innovation breakthrough in firms can deliver a strong advantage to the overall posture of the company in the marketplace and drive a major shift in industry leadership. However, not all companies show the ability to foster management innovation due to lack of generating unique ideas. A management innovation creates long-lasting advantage if it is based on a novel principle that challenges the traditional wisdom, is systemic in processes and methods, and is supported by a program of the company to carry out innovation (Hamel 2006).

240

RAJAGOPAL

New Trends in Business Modeling The concept of comparative advantages states that even if a country is able to produce all its goods at lower costs than that of another country, the trade still benefits mutually based on the comparative costs. It may be stated that the comparative costs may help the companies in determining to produce goods in the foreign countries that have comparative advantages over the others, and to decide either to export goods and services or produce therein. The major variables to measure the comparative advantages are land, labor, capital, resources, and cost of infrastructure, energy and tax structure. The internalization factor is a prerequisite for a prospecting company to go global. A multinational firm can serve a market across national boundaries either by exporting from a production facility located in the country of the parent company, or from a third country subsidiary or it can set up production facilities in the market itself. The sourcing policy of the firm is the result of the firm’s decisions as to which of its production facilities will service its various final markets. Thus, the firm establishes an international network linking production to markets. The major issues associated with the concepts of internalization of the firms may be as follow: • • • • • • •

Extension of direct operation of the firm Common ownership Control the activities of the market The companies having the global horizon Firms choosing the least-cost location for each functional activity Benefit-cost equilibrium Focuses on motives and decision process

Such network enables the firm to grow by eliminating external markets in intermediate goods and subsequently by internalizing those markets within the firm. When international markets are internalized the transfer of goods and services may take place. The internalization of markets is more significant wherever the research inputs and proprietary technology are an important part of the manufacturing process. The theoretical dimensions of internalization provide an economic rationale for the survival of the multinational companies considering the industry-specific factors (nature and type of product), region-specific product (territorial advantage), country-specific PESTEL factors comprising political,

9

SOCIAL ENTREPRENEURSHIP AND NEW BUSINESS TRENDS

241

economic, social, technological, environmental, and legal dimensions in managing new business opportunities and models. The outreach of the global market place has increased manifold with the emergence of a more open world economy, relaxed trade and tariff barriers, growing customer needs, inter-dependency, and intercommunication factors among the countries. Technology companies, including both start-ups and established players in the market, in the developed countries continue to roll out cloud technology services at a rapid pace. Cloud computing is a colloquial expression used to describe a multiple computing concept that involves a large number of computers connected through a real-time communication network. The operational process of cloud computing refers to network-based services which appear to be provided by real server hardware, which in fact are served up by virtual hardware, simulated by software running on one or more real machines. Cloud computing relies on sharing of resources to achieve coherence and economies of scale similar to a utility over a network through converged infrastructure and shared services. In marketing, cloud computing is largely used to sell application service aimed at running client server software from a remote location. Cultural diversity has multiple meanings. Diversity within a society refers to the richness of choice within that society. Globalization focuses on diversity across societies, that is, whether societies are becoming more similar. Cross-cultural exchange tends to favor diversity within a society but not across societies. Trade tends to increase diversity over time by accelerating the pace of change and bringing new cultural goods with each era or generation. Cultural similarities tend to come together over time across the regions. That is, although chain restaurants take an increasing percentage of restaurant sales, growth in dining out has led to an expansion of specialty food opportunities. While cross-cultural exchange alters and disrupts each society it touches, it also supports innovation and creative human energies. The author’s views are definitely positive on the benefits of cross-cultural exchange. The creative destruction of the market creates a plethora of innovative and high-quality creations in many different genres, styles, and media cross-cultural exchange expands the menu of choice, at least provided that trade and markets are allowed to flourish (Cowen 2002). Globalization and new technologies with interactive platforms have reduced the efficacy of command-and-control management style through effective corporate communication across the employees of the company,

242

RAJAGOPAL

market players, and consumers. Most companies tend to resolve the business situations within the company by conversing with the employees rather than simply issuing orders. Such interface strategy to resolve business situations, promote corporate image, products and services, operational flexibility, employee engagement, and strategic alignment. The organizational conversation reflects the essential attributes of interpersonal conversation structure with 4 I’s comprises intimacy, interactivity, inclusion, and intentionality. Intimacy drives a bottom-up exchange of ideas through social media platforms in an organization shifts and develop behavioral involvement of the consumers in discussion. Interactivity entails shunning the simplicity of monologue and embracing the unpredictable vitality of dialogue. Market access has also been improved by the growing trade blocks at the regional level. Such accessibility to the markets is further reinforced by reducing the trade barriers through far-reaching business communication strategies, product and market development programs, and customer relations. This situation has given a boost in determining the market opportunities as narrowing the trade barriers helped in deregulating certain sectors of trade such as financial services. However, there may be some exceptions to this common pattern. The global market place equipped with the application of global communications has become the focus of the global business arena that makes the world markets remain open and involve in the fair competitive practices. At the same time, the anti-globalization moves also exist in the process of development that protest against the hazards of suppressive strategies of the global companies affecting the regional trade entities. The globalization moves have opened up high comparative advantages in many manufactured goods through partnership deals to explore the business in the emerging economies. They generally display an increasing specialization trend and high consumer values. The leading alliances between the major multinational enterprises may be seen in reference to production, finance, technology, and supply chain along with other complementary activities. Production sharing is the contemporary global economic trend based on the concepts of comparative advantages that offers economic advantages by stages of the production process. The strategy of production sharing has emerged as a solution to an economic problem in developing countries where the absorption of the surplus manpower in industry is a national economic issue. Consequently, the developing countries turn to the developed countries as the major cost-effective labor market in order

9

SOCIAL ENTREPRENEURSHIP AND NEW BUSINESS TRENDS

243

to share production of labor-oriented products. Investment in production sharing operations has become an integral part of global efforts to reduce manufacturing costs and has contributed to the accelerated pace of cross-border integration of manufacturing in North America and the Caribbean Basin. Currently, production sharing seems to be a growing practice that helps in building and strengthening the international partnerships with global firms like Volvo, a Swedish automobile company having its manufacturing partners for heavy duty engines in India and Mexico. This practice offers both the developed and developing countries a scope to share their resources and strengths for the mutual benefits of international partnering. Marketing Strategies Most consumer-centric companies work with dynamic marketing-mix, as strategies often need to be revised either by introducing ad hoc elements of marketing strategies, or by laying emphasis on specific marketing-mix elements to develop marketing strategies specific to geo-demographic segments. The widespread adoption of marketing technology driving ecommerce trends, and social media leveraging peer interactions to share their consumption experiences has dramatically altered the set of products consumers compare before making a purchase decision. Marketing through social channels in the twenty-first century have succeeded in connecting consumers with companies, brands and destinations by highlighting peer evaluations, consumer preferences, and motivations toward buying decisions. However, the contribution of marketing technology in establishing both product and customer inter-connectedness across markets prompts companies to make the dynamic decision based on the market competition trends. The dynamic marketing decisions often develop inconsistencies in the consumer policies of the company, and the deliverables of brands are affected (Dass and Kumar 2014). Successful companies are selective toward developing strategies systematically, to create and lead new markets. Marketing-mix strategies need to be appropriately designed for acquiring new consumers and retaining those existing by providing competitive leverage and customer value. Developing marketing strategies for new customers with unfamiliar brands is challenging for the companies. An appropriate marketingmix also guides companies to minimize cost-time-risk convergence in marketing and optimize market share and profitability. The opportunity

244

RAJAGOPAL

to create and dominate a new market offers the prospect of working with right marketing-mix to gain competitive leverage in the marketplace and enhance the scope of business performance and profitability. In the growing technology environment, consumer relations have become increasingly pivotal in business, which determine the profitability of companies as well builds customers’ value. In this environment, consumer trust on brands affects the profitability of the companies and success of marketing strategies. Consumer trust is largely contributed by the psychodynamics among consumers, and sharing consumption experiences by disseminating the user-generated contents over digital space. The consumer psychodynamics creates demand and pull-effect for the brands in the markets, which allows the companies to reduce the marketing cost and increase profitability. Doing so requires allocating managerial resources to the geo-demographic market segments and consumer communities that helps companies to stay sustainable. The management design of the ‘customer pyramid’ provides a tool for managers to strengthen the link between consumer relations and profitability to determine the sustainable ways for maximizing profitability (Zeithaml et al. 2001). Marketing of innovative products and technology solutions along with a bundle of services is a priority in today’s increasingly competitive markets. However, companies are not always structured and capable of making such integration in their products- and services offerings in the market to gain competitive advantage. Thus, most companies prefer to engage in price competition rather than delivering customer value through integrated products and services. Customer-centric companies such as Cisco Systems have developed customer satisfaction matrix, and laid policies that support incentives in rewarding customer-focused cooperation. Organizations, who want to deliver customer-focused solutions, require a mix of employees to be generalists instead of specialists. Teams offering customer-focused solutions require experience with more than one product or service, deep knowledge of customer needs, and the ability to traverse internal boundaries. Market orientation strategy and customer-centric marketing approaches together have significant impact on the performance of new products and technologies of the company. Managers should integrate the market orientation and customer services strategies to enhance the customer value. One of the many challenges to the dealer firms is to incorporate preferences of the customer into overall performance and services, in order to maximize the customer

9

SOCIAL ENTREPRENEURSHIP AND NEW BUSINESS TRENDS

245

value. An augmented and sustainable customer value builds loyalty toward the product and the brand. Market orientation strategy for innovative and technology-led products needs to generate thorough awareness among the consumers about the utilitarian and hedonic aspects of products. The innovative concept of market entry strategy is based on moving with consumer space which indicates that foreign firms enter the destination market by developing adequate consumer awareness on the products and services prior to launch. This strategy is followed largely by the fast-moving consumer goods manufacturing companies, and is termed as go-to-market strategy. Go-to-market planning enables the firm to achieve higher margins, accelerated revenue growth, and increased customer satisfaction through existing sales channels. An effective go-to-market strategy aligns products and services and processes, and partners with customers and markets to deliver brand promise, the desired customer experience, and tangible value. Go-to-market strategy services help technology suppliers overcome market challenges. Market entry through expansion of the company draws many challenges to firms considering new business options. Capitalizing on overseas markets often opens doors to new levels of top and bottom line growth. Moreover, introducing a new product or service into a new market is an even bigger strategic challenge. A successful strategy may conceptualize well-structured entry processes to drive future growth, explore diversified stream of revenues, and augment profit margins. It also addresses new competitors, customers, partners, suppliers and other market dynamics. However, the licensing and franchising have emerged as most popular modes of entry for consumer products and services companies. The low intensity modes of entry minimize risk, as contracting with a local distributor requires no investment in the destination market, the local distributors may own offices, distribution facilities, sales personnel, or marketing campaigns. Under the normal arrangement whereby the distributor takes title to the goods, or purchases them as they leave the production facility of the company, there is not even the credit risk, assuming that the distributor has significant creditworthiness in the market. Franchisors must put resources in place to support and benefit from their chosen strategy. They use the chain building strategy to strike a balance between standardization and innovation by building resources that foster trust and encourage knowledge sharing with franchisees (Gills and Combs 2009). This way the franchising and licensing are emerging as

246

RAJAGOPAL

the most common modes of market entry of consumer products companies. Emerging markets are still not equipped with business-operations infrastructure, and lack specialized intermediaries, regulatory systems, and contract-enforcing methods that hinder their mobility in the overseas markets. Consequently, multinational companies find it difficult to operate in emerging markets, which has resulted toward resistance in investing by many companies. If multinational companies are unable to develop appropriate strategic directions to engage with emerging markets, they are unlikely to remain competitive and penetrate their brand in the destination markets.

Global-Local Effects Innovation is a continuous process and it helps organizations grow. Growth is often measured in terms of business performance, turnover, and profit contributed by the products and services. Performance of innovative products is measured in reference to the generated competitive differentiation in marketplace, consumer experience, quality of products, and values and marketing efficiency. Innovation is the process of making changes to something established by introducing something new. Innovation can be radical or incremental that can be applied to products, processes, or services, and in any organization. Nurturing innovation projects is a complex process for the small, medium and start-up organizations. Most innovative projects suffer from internal and external financial constraints that affect the commercialization of innovations during the concept stage (García-Quevedo et al. 2018). Innovation in small and micro enterprises are explored at all levels in the marketplace by generating consumer involvement in the projects of new product or services development. In view of the fast-growing market competition, more and more companies are recognizing innovation as the business opportunity. Such shift in thinking in many companies and industries, where learning-organization principles are being applied to create sustainable business models, has evidenced change in organizational culture and improvement in the core competencies (Rajagopal 2016). Small firms differ in assessing the cost, benefits, and risks (CBR) effects during the manufacturing to marketing process as compared to large partnering firms engaged in innovation across destinations. However, strategic alliances between small and large companies toward innovation sharing, and coopetition in building marketing strategies can provide

9

SOCIAL ENTREPRENEURSHIP AND NEW BUSINESS TRENDS

247

these firms an appropriate CBR measures. In this process, small and large firms evaluate benefits and risks associated in developing strategic alliances for acquisition and commercialization of innovations of small firms. It has been observed in previous research studies that small firms are less reluctant on alliance project than large firms, especially if the cooperation for managing competition (coopetition) allows them to reduce their costs and optimize long-term benefits. The innovation alliances between small and large companies help in developing design-to-market and time-to-market strategies (Chiambaretto et al. 2020). Small innovation-led firms grow as learning organizations. They become inspirational, energetic places to work, where even relationships with customers and suppliers improve. However, a more integrated view will enable companies to innovate for long-term profitability and sustainability. There are three core competencies that learning organizations must master to profit from sustainability: encourage systemic thinking; convene strategic market players and customers toward changing conventional thinking; and take the lead in reshaping economic, political, and societal forces that baffle change (Senge and Carstedt 2001). Companies often select innovative business projects considering their potential for commercialization and gaining high market share in the competitive marketplace. A single company is seldom capable of generating successful diffusion for commercialization of an innovation. Success of innovative products and services often requires cooperation between market players, organizations, and stakeholders in marketing through conventional and digital platforms. Thus, the networking aspect of commercialization is crucial for any innovation, especially in the mass and bottom-of-the-pyramid market segments. Broadly, customers and users, distributors, investors, associations, public organizations, and policy makers and regulators can support commercialization by facilitating innovation, adoption, and diffusion process within the existing market, or help in creating new markets (Aarikka-Stenroos et al. 2014). Innovative business projects are fundamentally an approach to reorient business around consumer needs by realigning corporate resources, processes and profit formula with this new value propositions. Project management approaches for innovative products and services in small firms are evolving to be more flexible and adaptive to meet the challenges associated with an increasingly complex and dynamic environment (Nguyen et al. 2018). Innovative business projects should not be picked up by companies emotionally and impulsively. They should be evaluated at

248

RAJAGOPAL

the foreground in reference to management capabilities and their potential for commercialization. Innovation projects often fail as they have a kick-start with loosely, or sometimes ambiguously, defined objectives, and project managers realize in the mid-stream of project process that it is going astray. Most start-up enterprises tend to define innovation projects as experimental and exploratory; they seldom follow loose linear guidelines and suffer serious setbacks over the project stages. As innovation projects generally need to be sold to project sponsors and funding committees, project teams should be more involved and responsible while carrying out the projects. Innovation business projects are largely laid on multi-task and multi-decision process that is susceptible to risks and uncertainties between the project stages, unless a well-developed set of criteria for the project has been developed in advance. Innovation projects should be time bound to reduce the risk of commercialization and adaptation among consumers. However, sometime they are dragged on and on with endless tweaks, and companies struggle to make adjustments to finish the project and launch the innovation in the market. Start-up and small firms either lean at the large firms for sponsoring their innovation projects and incubating them for commercialization or obtain long-term debt from private or government sources. Start-up firms with better performance prospects are more likely to use business debt or soft loans spread over long time. Compared to all-equity firms, infant companies using debt in the initial years of operations make themselves significantly capable to survive and generate desired profit (Cole and Sokolyk 2018).

References Aarikka-Stenroos, L., Sandberg, B., & Lehtimäki, T. (2014). Networks for the Commercialization of Innovations: A Review of How Divergent Network Actors Contribute. Industrial Marketing Management, 43(3), 365–381. Acs, Z. J., Desai, S., & Hessels, J. (2008). Entrepreneurship, Economic Development and Institutions. Small Business Economics, 31(3), 219–234. Carayannis, E. G., & von Zedtwitz, M. (2005). Architecting GloCal (Global– Local), Real-Virtual Incubator Networks (G-RVINs) as Catalysts and Accelerators of Entrepreneurship in Transitioning and Developing Economies: Lessons Learned and Best Practices from Current Development and Business Incubation Practices. Technovation, 25(2), 95–110.

9

SOCIAL ENTREPRENEURSHIP AND NEW BUSINESS TRENDS

249

Chiambaretto, P., Bengtsson, M., Fernandez, A. S., & Näsholm, M. H. (2020). Small and Large Firms’ Trade-Off Between Benefits and Risks When Choosing a Coopetitor for Innovation, 53(1), 1–23. Cole, R. A., & Sokolyk, T. (2018). Debt Financing, Survival, and Growth of Start-up Firms. Journal of Corporate Finance, 50, 609–625. Copley, P. (2013). The Need to Deliver Higher-Order Skills in the Context of Marketing in SMEs. Industry and Higher Education, 27 (6), 465–476. Cowen, T. (2002). Creative Destruction: How Globalization Is Changing the World’s Cultures. Princeton, NJ: Princeton University Press. Dass, M., & Kumar, S. (2014). Bringing Product and Consumer Ecosystems to the Strategic Forefront. Business Horizons, 57 (2), 225–234. Gandhi, T., & Raina, R. (2018). Social Entrepreneurship: the Need, Relevance, Facets and Constraints. Journal of Global Entrepreneurship Research, 8(Art. 9), 1–13. https://doi.org/10.1186/s40497-018-0094-6. García-Quevedo, J., Segarra-Blasco, A., & Teruel, M. (2018). Financial Constraints and the Failure of Innovation Projects. Technological Forecasting and Social Change, 127 (1), 127–140. Gills, W. E., & Combs, J. (2009). Franchisor Strategy and Firm Performance: Making the most of Strategic Resource Investments. Business Horizons, 52(6), 553–561. Hamel, G. (2006). Why, What, and How of Management Innovation. Harvard Business Review, 84(2), 72–84. Heeks, R., Foster, C., & Nugroho, Y. (2014). New Models of Inclusive Innovation for Development. Innovation and Development, 4(2), 175–185. Homburg, C., Jozi´c, D., & Kuehnl, C. (2017). Customer Experience Management: Toward Implementing an Evolving Marketing Concept. Journal of the Academy of Marketing Science, 45(3), 377–401. Mair, J., & Marti, I. (2006). Social Entrepreneurship Research: A Source of Explanation, Prediction, and Delight. Journal of World Business, 41(1), 36–44. Mair, J., Martí, I., & Ganly, K. (2007). Institutional Voids as Spaces of Opportunity. European Business Forum, 31(1), 34–39. Nguyen, D., Nguyen, H., & Nguyen, K. S. (2018). Ownership Feature and Firm Performance via Corporate Innovation Performance: Does It Really Matter for Vietnamese SMEs? Journal of Asian Business and Economic Studies, 25(2), 239–250. Rajagopal. (2016). Sustainable Growth in Global Markets: Strategic Choices and Managerial Implications. Basingstoke, UK: Palgrave Macmillan. Senge, P. M., & Carstedt, G. (2001). Innovating Our Way to the Next Industrial Revolution. MIT Sloan Management Review, 42(2), 24–38. Stokes, D. (2000). Entrepreneurial Marketing: A Conceptualisation from Qualitative Research. Qualitative Market Research, 3(1), 47–54.

250

RAJAGOPAL

Yunus, M., Dalsace, F., Menasce, D., & Faivre-Tavignot, B. (2015). Reaching the Rich World’s Poorest Consumers. Harvard Business Review, 93(3), 46–53. Zeithaml, V. A., Rust, R. T., & Lemon, K. N. (2001). Customer Pyramid: Creating and Serving Profitable Customers. California Management Review, 43(4), 118–142.

Index

A administrative complexities, 55, 124 attributes, x, xiii, 16, 19, 25, 39, 46, 48, 51, 54, 60, 62, 68, 71, 73, 80, 86–89, 92–94, 103, 110, 112, 114–116, 118, 120, 131, 135, 137, 138, 180, 181, 188, 192–194, 196, 197, 207, 219, 223, 225, 227, 230, 242 awareness, x, xii, xiv, 17, 25, 58, 59, 67, 68, 72, 76, 80, 83, 87, 88, 95, 107, 118, 123, 130–133, 142, 151, 159, 162, 171, 182, 184, 188, 191, 195, 205, 217, 226, 227, 245 B backward linkages, 39, 147, 172 Bangladesh, 238, 239 branding, xii, xiii, 85, 95, 148, 203, 219, 225, 226, 230 Brazil, xii, 8, 43, 78, 113, 142, 170, 175, 176 business modeling

canvas, 39, 42 integrated, vii, 17 sustainability-led, 82, 131, 159, 204, 206 C circular economy, viii, xi–xiii, 4, 6, 15, 19, 21, 35–38, 43, 46, 56–58, 89, 129, 135, 141, 149, 160, 206 cleaner energy, xi–xiii, 103 co-creation, 9, 23, 49, 55, 76, 78, 117, 151, 185, 187, 188, 191, 211, 212, 215, 220, 221, 235 co-designing, 3, 11, 76, 78, 185, 197, 229 co-evolution, 9, 23, 48 cognitive ergonomics, viii, 73, 75, 104, 118, 195 collective intelligence, 9, 12, 15, 23, 36, 38, 48, 62, 71, 75, 77, 83, 118, 209, 211 commons resources of, 46, 52, 55

© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG, part of Springer Nature 2021 Rajagopal, Sustainable Businesses in Developing Economies, https://doi.org/10.1007/978-3-030-51681-9

251

252

INDEX

concept mapping, xiii, 192 conscious consumption, x, xi, xiii, 37, 83, 140, 179 conservation, 17, 46, 52, 77, 85, 103, 105, 163, 173, 174, 176, 203, 205–207, 220 consumer behavior, attributes of, 149, 192 consumer culture, 71, 80, 89, 90, 92, 93, 117 consumption behavior, 83, 91, 171 pattern, 83 practices, 16, 17, 38, 57, 70, 75, 89, 182, 207 sustainable, 83, 85 corporate citizenship, 3, 4, 216 corporate consciousness, 171 corporate governance, ix, xiv, 4, 9, 71 corporate social responsibility, vii, xi, 3, 4, 8, 14, 23, 26, 28, 29, 42, 44, 49, 59, 77, 78, 104, 120, 121, 170, 171, 205, 206 cost-time-risk factors, 138, 139, 149 crowdfunding, 12, 13, 42, 82, 130, 144, 161 crowdsourcing, 9, 12, 15, 23, 39, 48, 52, 77, 78, 116, 130, 147, 162, 209 customer-centric, 7, 53, 55, 69, 76, 89, 152, 185, 190, 222, 225, 229, 244 innovation, x, 24, 219 marketing, 6, 179 D Dabbawala (food delivery), 143 decision dynamics, 52 design thinking, 38, 39, 48, 114, 115, 152 design-to-market, 19, 114, 117, 236, 237, 247

developing countries, 6, 43, 46, 49, 60, 72, 106, 107, 111–113, 121, 132, 137, 138, 144, 159, 161, 166, 169, 181, 182, 185, 203–205, 212, 219, 220, 238, 242, 243 development, viii, ix, xi–xiii, 7, 13, 16–18, 26, 27, 29, 39, 44, 46, 48–53, 55–57, 59–62, 73, 90, 94, 104, 105, 110, 112, 116–118, 121, 124, 125, 129, 131, 140, 142, 145, 151, 160–164, 166, 167, 169, 171, 172, 179, 182, 190–192, 194, 196, 197, 205, 206, 210, 212–216, 219, 227, 229, 231, 236, 242, 246 disruption, ix, 6–8, 50, 56, 76, 106, 185 distinctiveness theory, 91 E eco-innovation, ix, xii, xiii, 35, 44, 46, 49, 50, 56, 59, 62, 103, 130, 131, 149, 153, 162, 203–211, 213–215, 217 ecological, vii, xiii, 13, 17, 19, 23, 54, 58, 62, 132, 141, 146, 147, 160–162, 165, 179, 203–206, 208–210, 212, 216, 220 economic factors macro-, 9, 50, 51, 133 micro-, 133 ecosystem business, xi, xiii, 4, 7–9, 11, 12, 38, 193 innovation, 11, 45, 46, 48 electricity, ix, xii, 103, 113, 175 emerging markets, x, xiv, xvii, 7, 24, 25, 27, 41, 43, 46, 60, 87, 89, 92, 117, 142, 145–147, 167, 168, 181, 205, 208, 215, 217, 218, 236, 237, 246

INDEX

emissions, ix, 4, 43, 104, 106, 113, 130, 131, 134, 138–140, 175 energy biomass, 105, 113, 114, 117, 125 business modelling, xii, 107, 110, 114 cluster, 109, 113 generation, 109, 113, 114, 116, 125 infrastructure, 110 politics, 111 pooling, 110 entrepreneurship, x, xi, xiii, xiv, 9, 19, 23, 38, 54, 83, 219, 235–238 ethical consumerism, 72 external influence, 14, 67 F for-profit, 3, 7, 15, 147 fossil fuel, ix, 57, 105, 106, 111, 185 frugal innovation, xiii, 9, 13, 23, 83, 149, 203, 204, 215, 217, 218 G General Electric (GE), 22, 24, 131 geo-demographic, x, 8, 11, 16, 19, 23, 37, 46, 52, 53, 69, 76, 77, 80, 82, 86, 118, 132, 137, 147, 149, 172, 175, 181, 185, 189, 211, 213, 217, 218, 243, 244 globalization, 26, 41, 50, 51, 53, 55, 72, 89, 90, 115, 160, 167, 168, 170, 205, 238, 241, 242 global-local effects, xiii, 246 global markets, 24, 51, 55, 77, 172, 179, 181, 190, 225, 238 government, ix, x, 5, 11, 28, 43, 44, 48, 49, 52, 53, 56, 58, 60, 75, 82, 85, 104, 107, 109, 111, 113, 117, 120, 131, 132, 134, 140, 149, 161, 162, 168–170, 172,

253

175, 179, 182, 184, 185, 205, 206, 210, 214, 219, 238, 248 green consumerism, xii, 67, 68, 184 green energy, ix, xii, 103–105, 107, 109–111, 114–118, 121, 123–125, 182, 185, 205, 218, 235 program on, 104, 111, 120 greenhouse gasses, 110 green products, viii, 6, 56, 67, 82, 93, 138, 179, 181, 184, 185, 188, 205 green recovery, 205, 209, 236 green transportation, 135, 138

I IKEA, 27, 28, 76, 171, 185 industry attractiveness, 39, 41, 52, 137, 191 innovation adaptation, xii, 114, 120 ambidextrous, 214 disruptive, 25, 75, 185, 206, 207 frugal, xiii, 7–9, 13, 23, 24, 83, 149, 203, 204, 210, 215, 217, 218 incremental, 46, 148, 213, 214, 238, 246 project management, 120 reverse, x, 8, 23–25, 83, 146, 149, 210 social, xi, xiii, 6, 9, 11, 23, 28, 44, 49, 53, 68, 77, 78, 114, 172, 221, 235 inventory management, ix, xi–xiii, 43, 129, 132, 134, 154 planning, xii, 154, 155 investment, 6, 7, 13, 17, 21, 27, 49–51, 53, 60, 82, 90, 105, 107, 117, 121, 131, 135, 138–141, 143, 147, 154, 165, 170, 171,

254

INDEX

175, 205, 220, 221, 228, 230, 239, 243, 245 INVUCA, 51, 171

L leadership, 9, 16, 21, 29, 53, 90, 109, 122, 142, 147, 159, 161, 162, 181, 184–186, 208, 218, 239 lifecycle innovation, 151 product, vii, 38, 148, 205 project, 43 local-global business, 14 logistics, ix, xi, xii, 19, 43, 129–135, 137, 138, 140–145, 149, 154, 155, 208, 235

O organic food, 57, 61, 62, 76, 86–88, 171, 184 organization, 5, 7, 9, 11, 13–15, 22, 23, 27, 38, 42, 44, 45, 49–52, 54, 57, 58, 61, 77, 83, 104, 109, 112, 118, 122, 130, 132, 134, 141, 143–148, 152, 159, 160, 162, 163, 169, 170, 180, 185, 192, 197, 206, 208, 210, 213, 214, 216, 217, 219–222, 226, 229, 235, 236, 238, 242, 244, 246, 247

M market competition, 12, 51, 55, 137, 140, 147, 151, 152, 155, 156, 174, 208, 209, 236, 243, 246 competitiveness, 5, 85, 89, 149, 182, 219 strategies (11Ps), 85 marketing-mix, 186, 197, 226, 230, 243, 244 Mexico, xii, 142, 168, 170, 175, 221, 243

P participatory research appraisal, 161 performance with purpose, 21 peripheral ecosystem, 107, 109 political governance, xii ideologies, 113, 168, 170, 184 public policies, viii–x, xii, 5–7, 11, 23, 26, 43, 44, 46, 49–51, 58, 59, 82, 83, 85, 103, 104, 109, 113, 116, 120, 131, 133, 134, 137, 144, 149, 159, 160, 162, 164, 165, 170, 182, 188, 205, 206, 210, 212, 213, 215, 217 public-private participation, xii, 11, 159

N niche, x, xiv, 8, 11, 22, 39, 42, 44, 46, 51, 71, 75, 82, 85, 110, 113, 131, 133, 137, 149, 161, 171, 184, 203, 206, 210, 211, 217–219, 228, 237 non-governmental organization, 11, 48, 49, 61, 161, 172, 206, 210, 222 not-for-profit, xi, 3, 15

R recycling, viii, 19, 35–39, 42, 43, 46, 48, 57, 140, 204 renewable energy, viii, ix, xii, 41, 57, 103–107, 109–111, 113, 114, 120, 121, 161, 166, 182, 184, 211, 220 resource-based view, 14, 83, 151 retailing, xii, 89, 90, 92, 94, 103, 116, 148, 156, 179, 190, 221

INDEX

reverse innovation, 24, 25 S self-help group, 49, 61, 105, 113, 161, 192, 210, 238 self-reference, 36, 68, 69, 73, 179, 181, 195 semantics, xiii, 193–195 servitization, xii, 25, 26, 95, 103, 131, 212 shared values, 16, 46, 78 social capital, xii, 13, 59–61, 75, 78, 144, 235 social consciousness, viii, xiii, 137, 141, 162, 163, 184, 188–190, 192, 204, 216 social entrepreneurship, 23, 83, 235–237 social governance, 9, 113, 123, 133, 134, 149, 159, 160, 219 social management model, xii, 123 social marketing, xiii, xiv, 78, 143, 181, 186, 187, 220, 222–224 social needs, xiii, 6, 9, 11, 21, 23, 26–28, 39, 44, 48, 69, 78, 106, 109, 113, 114, 149, 191, 206, 210, 213, 217, 235 social products, 17, 25, 26, 85, 92, 133, 160, 165, 191, 221 social values, x–xii, xiv, 4–6, 9, 14, 15, 18, 21, 23, 27, 28, 46, 55, 57, 58, 60, 62, 67, 70, 83, 130, 133, 137, 145, 191, 193, 204, 207, 215, 236 socio-political, xiv, 7, 121, 143, 144 drivers, 4 governance, 160 Spain, xii, 44, 170, 174 stakeholder, ix, xi, xiv, 4–7, 9, 11–19, 21, 23, 25, 26, 28, 29, 36, 38, 43, 44, 46, 48–50, 54, 60–62, 69, 75, 77, 78, 82, 83, 85, 90,

255

114–117, 121, 122, 130, 132, 137, 140, 145, 146, 149, 152, 159–162, 165, 166, 170, 173, 175, 184, 187, 189–191, 207, 210–212, 215–217, 235, 236, 239, 247 strategic thinking, 9 sustainability projects, x, xii, 5, 8, 15, 17, 23, 28, 48, 49, 51, 55–58, 83, 121, 130, 149, 159–161, 163, 164, 166, 169, 171, 175, 189, 205, 206, 209, 211 sustainable development goals, 3, 9, 13, 56, 85, 103, 110, 111, 121, 142 sustainable manufacturing, xiii, 45, 206, 212–214 systems thinking, 5, 26, 160, 163

T technology, xi, xiv, 4, 6, 9, 11–13, 21, 38, 39, 46, 48–50, 53, 55, 60, 68, 69, 71, 75–77, 83, 85, 88, 89, 105, 107, 109, 110, 114–118, 120–122, 124, 125, 131, 134, 135, 138–141, 143, 145–147, 151–153, 155, 170, 180, 182, 185–187, 190–192, 206, 208, 210, 213–216, 238, 240–245 local, 76, 83, 116, 185 low-cost, 181 transformation, 26, 55, 113, 143, 188, 189, 219, 236 transportation demand and supply, 133, 134 economics of, xii, 133, 135 facilities, 139 hybrid system, 139 regionalization of, xii, 140

256

INDEX

sustainable, 131–135, 138, 141, 142, 144 U Uganda, 204

Urjagram (energy village), 104, 105

V value and lifestyle, 85, 88