CREATING SHARED VALUE 7
Organizationsare involved in creating shared value through the creation ofprofitable business strategies, which deliver substantial socialbenefits. This approach creates significant new opportunities forcompetitive advantage and profit, as well as benefiting the societythrough unleashing power of business in helping to resolve criticalglobal problems (Porter et al., 2011). Although the concept of sharedvalue has been widely embraced, tolls for putting the concept intopractice are at their infancy stage. Shared value entails amanagement strategy, which focuses on entities developing measurablebusiness value through the identification and addressing of socialproblems, which overlap with their business. The framework of sharedvalue is of immense importance because it helps in creating newopportunities for businesses, civil society organizations, andgovernments in leveraging the authority of market-based competitionin the address of social problems (Porter et al., 2011). Shared valuedoes not entail the redistribution of value developed throughphilanthropy or stakeholders’ value, but shared value ratherfocuses on the creation of significant social and economic valuethese are new benefits that go beyond the cost for the society andbusiness. As a matter of fact, the concept of shared value is a newrole for business in society, which goes beyond the traditional modelof corporate social responsibility. Instead of focusing on reducingharm in the business’ existing operations, strategies of sharedvalue engage the innovation and scale of companies in advancingsocial progress.
Besides,shared value provides new ways of engaging other societal actors withcorporations the delivery of social impact. For instance,non-governmental organizations may develop their strategic prioritiesso as to be capable of partnering more effectively with businesses onshared value strategies. Government and philanthropic bodies may findnew ways of incentivizing private sector investment in eradicatingpressing social issues. On the other hand, investors may gain insightinto businesses’ future profit and growth potential throughunderstanding how strategies of shared value address social issues,which directly affect performance (Michelini,2012).Furthermore, students, academics and individual practitioners in theworld may grow their understanding and application of strategies ofshared value within their businesses, academic institutions, andsocial enterprises. Therefore, as a principal part of their corporatestrategies, most of the world’s respected companies have embracedthe shared value approach in order to address social problems atlarge.
Accordingto Porter & Kramer (2011), the competitiveness of any company andthe health of community surrounding the companies are closelyrelated. This is because a business requires a successful communityin creating demand for its products, providing crucial public assets,and offering a supportive environment. On the other hand, a communityneeds businesses that are successful so as to offer opportunities forjobs and wealth creation to its citizens. This relationship impliesthat public policies that tend to undermine the competitiveness andproductivity of companies are self-defeating. Porter & Kramer(2011) argue that, businesses have ignored the creation of societalvalue, but they need to do so in order to remain competitive anderadicate social problems.
Thechief idea that the authors of the “”article tries to bring is that companies should engage in strategiesof shared value because these strategies help in connecting betterthe success of companies with societal improvements (Porter &Kramer, 2011). This connection is of immense importance because itopens up different ways of serving emerging needs, gainingefficiency, creating differentiation, and expanding markets.According to the authors, companies can be in a position to developeconomic value through creating societal value. There are threedifferent ways that companies can use in creating societal value,which include reconceiving their products and markets, building ofsupportive industry clusters at company’s locations, and redefiningproductivity in value chain (Porter & Kramer, 2011).
Developingshared value from reconceiving of products and markets usually focuson market share, profitability, and revenue growth that arise fromthe social, environmental, or economic development benefits that aredelivered by products and services of a company. On the other hand,developing shared value from redefining productivity in value chainusually focuses on improvements in internal operations, which improveinput access, cost, quality, and productivity attained throughimprovement of environment, efficient resource utilization, suppliercapability, investment in employees, and other areas. Alternatively,developing shared value from enabling of local cluster developmentfocuses on improving the external environment for the businessthrough strengthening local suppliers, local infrastructure, andlocal institutions, as well as community investments in a way thatalso enhances business productivity.
Fromthe authors’ point of view, companies should apply shared valuestrategies in their business because they tend to make businessesreap a lot of benefits, while at the same time society benefits. Thisperspective is true because, when shared value strategies becomeemployed, both business and society benefits. For instance,reconceiving product and markets result in an increased revenue,increased market growth, increased market share, and improvedprofitability on the side of business. On the other hand,reconceiving product and markets leads to society benefiting fromimproved education, improved nutrition, reduced carbon footprint, andimproved patient care. Besides, through redefining productivity invalue chain, businesses benefit from improved profitability, improvedquality, secured supply, enhanced productivity, and reduced operatingand logistical costs. From this initiative, society benefits fromreduced water and energy use, improved job skills, reduced rawmaterials, and improved employee incomes (Porter et al., 2011).Therefore, both society and businesses benefit from shared value.
Besides,authors have a perspective that although creating shared value helpsin solving social problems, not all social problems can become solvedthrough embracing shared value solutions. However, shared valueprovides corporations with the opportunity of utilizing theirresources, skills, and management capability that leads to socialprogress. With this reasoning, it is critical to create shared value.
Anethical and regulation consideration that emerges concerns whethercompanies should be forced to develop shared value and whether thereshould be regulations that control the way companies integrate sharedvalue strategies in their operations. It sounds unethical to forcecompanies to create shared value because it can be perceived likedictating what companies should do in order to make profits, despitethem having their well developed strategies. However, there should besome regulations that indirectly control the operations of companiesin order to help in integrating shared value strategies in theiroperations for the sake of societal benefits.
Fromthe authors’ point of view, creating shared value should be anintegral part of any business since through creating shared value, itis possible to eradicate some of the social problems that societyexperiences and presents a lot of potentials to the business. Withthis view, businesses should perceive creation of shared value as animportant aspect of growing their business although not all socialproblems can get solved through creating shared value.
Michelini,L. (2012). Socialinnovation and new business models: Creating shared value inlow-income markets.Berlin: Springer.
Porter,E.M., Hills, G., Pfitzer, M., Patscheke, S. & Hawkins, E. (2011).MeasuringShared Value: How to Unlock Value by Linking Social and BusinessResults.FSG, Cambridge.
Porter,E.M. & Kramer, M. (2011) “: How to FixCapitalism and Unleash a new Wave of Growth. HarvardBusiness Review, volume89, issue (1/2), pages 62-77.