Introduction
Creating shared value has become a popular debate topic in regards to corporate social responsibility. The central idea or premise that creating shared value entails involves looking at the fact that for a company to achieve success and be profitable they must satisfy and create economic value for both the company and society. I think the Shared Value framework defines a new role for businesses in dealing with the society and it goes beyond corporate social responsibility. Rather than focusing on mitigating harm in the company’s existing operations, shared value strategies engage the innovation of companies to help in the advancement of social progress. I believe that this is a new area of study that large multinational corporations are just beginning to grasp and understand. But should this topic of shared value be an important part of a company’s corporate strategy?
Article Summary’s
The concept of shared value was firstly defined in the Harvard Business Review article “Creating Shared Value” by Professors Michael E. Porter and Mark R. Kramer. They view that business in recent years has been viewed as a major cause of social and economic problems. The big problem Porter and Kramer find is that the problems lie within the companies themselves. Their approach to value creation has become outdated and narrowly minded they continue to emphasize short term financial performance and ignore the boarder influences that can ultimately determine the long term success of the organization. They view that companies must take the lead in bringing business and society back together and the solution lies with the principle of shared value. Porter and Kramer urge leaders to recognize that shared value is not social responsibility, philanthropy, or even sustainability, but a brand new way of achieving economic success. They advocate that creating shared value will drive the next wave of innovation and growth in the global economy. They notion that already a few companies have started to look at the shared value process including names like Google, IBM, Nestle and Wal-Mart. Yet, it’s still early in its process of developing and leaders will have to realize that they need to develop new skills and knowledge to properly appreciate society and its benefits to the company’s bottom line. There are three key ways that Kramer and Porter suggest companies can create shared value opportunities. Firstly by reconvening the company’s products and markets, Instead of businesses looking to create demand for a product, the authors challenge them to identify a fundamental societal need in which their products might serve. Businesses are often far more effective than governments at marketing to customers to embrace products and services that create social benefits. The hope here is that this will lead companies to discover new opportunities for differentiation and create access to new markets. Secondly, a company should redefine its value chain including considerations that increase shared value include the evaluation of energy use and logistics, resource use, employee productivity, and location. Reducing some your costs can have mutual benefits. The authors used Wal-mart as an example. By reducing its packaging and cutting 100 million miles from their trucking routes, Wal-mart was able to lower their carbon emissions and it saved them roughly 200 million in costs.
Lastly, companies should look at enabling local cluster development. Porter and Kramer believe that productivity, innovation and competitiveness are strongly influenced by so called “clusters,” or geographic concentrations of supply chain partners, NGOs, associations and surrounding logistical infrastructure. They point out a key aspect of cluster building is looking at the formation of open and transparent marketplaces. When a company is able to build new clusters in their key production locations they are able to
