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7/27/2019 Shared Value Piyush 41
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EXECUTIVE SUMMARY: SHARED VALUE
The article has its core in busting the misconceptions that shroud the business
world and their policies and practices when it comes to defining the appropriate
corporate social responsibility of the firm. For most of the firms this starts with
externalities and the pressure put on them by the government and social
organizations and ends with an array of disjointed and incoherent activities which
fill up their annual CSR report and acts as a cure to relieve the pressure and build
their reputation of a caring organization.
This is nothing but a feel good exercise as it not only fails to improve the economic
or social conditions of the community in which they operate but also fails to
enhance their competitive position in the market that they cater to. This article
starts with statement which in itself is suggestive of the change which are required
and which must be instituted if the companies want to have a sustainable and
profiting business in the long run.
The article reiterates the point that long gone are those days when businesses couldsee themselves as total unrelated and unconcerned with the needs, requirements
and problems surrounding the community which they serve, today companies are
quickly identifying and noticing that social needs and business gains are co-
dependent and thats the core of the idea of Shared Value for it means to conduct
business in such way as to enhance your profitability and at the same time improve
the economic and social condition of the community in which they operate.
Article implies that contrary to formal belief that social concerns and responsibility
are an impediment to the profit margins of the company and are nothing but a
necessary hole in the pocket for the sake of their business, they act as an
opportunity for the businesses to reap benefits while being socially relevant and
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responsible. There are several examples to support this view, number of companies
like NESTLE, GE, WELLS FARGO, WALMART etc have modeled their
businesses in such a way that benefit the society as well generate dividends for
their shareholders in values far greater than before.
These societal benefits are not superficial and go far beyond the concept of
REDISTRIBUTION where companies share a part of their business profit with
their suppliers and communities in which they operate. This is about collaboration,
co-creation of value, NESTLE for example provides financing, shares technology
and help its suppliers in production of coffee which ensures that it will have
uninterrupted supply of quality coffee, which means increased profits and this
offsets the cost incurred in helping their suppliers, who are also more prosperous
because their produce has increased in quality and quantity and in turn their
income from its sale.
Many other companies are realizing this very fast that they depend on the societal
resources, infrastructure and people to ensure the sustainability and profitability of
their business. Companies must recognize the social problem related to their line of
business and address it such a way which increases their gains and makes a
positive impact in society for example Microsoft has invested millions of dollars of
money in educational institutes to improve the educational levels and conditions of
these non performing school, this serves two purpose first improves the
educational condition of the people as well provides competent and educated
individuals which are productive to the companies when recruited. Similarly
Marriott has started an initiative which provides unemployed individuals with
basic level of the on the job training, this isnt just beneficial community service as
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most these people are employed by Marriott which saves training cost and also the
retention rate for these people is an impressive 61% after the 1st year.
Companies must identify value chain activities like procurement, distribution,
production where they can create shared value. Initiate working conditions to use
resources like water and electricity are no longer considered a burden or external
pressure but are necessary exercises to reduce cost and increase efficiency.
Companies must realize that creating shared value is NOT PHILANTHROPY but
is in their own self interest, if this becomes the norm then even the govt. can roll
out policies which are supportive of these businesses and not restrictive and
imposing.
COMPARISON:
The article STRATEGY and SOCIETY also stresses on the need of creating shared
value and the integration of social needs and business gains but its main focus is on
highlighting the interdependency between the corporate and society. The outside-in
linkage talks about the factors such as human resource, rules governing the
business, size and sophistication of the demand and the local availability of the
supporting businesses whereas the inside-out linkage talks about the dependency of
society on the business firms to improve economic conditions and income
generation as well the impact of the businesses on the environment and resources.
The article also highlights the difference between RESPONSIVE CSR and
STRATEGIC CSR whereas the focus of the SHARED VALUE article is on
defining how to create shared value by focus on social needs concerning your
business and modeling your business in a way that its results in societal benefits as
well as business gains for the concerned company.
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