Michael Porter on purpose
2021-2022 Theory base analysis
Prepared by: Ibrahim Rahal
Instructor: Dr. Ali El Dirani
LEBANESE UNIVERSITY
FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION
, 1
Businesses can generate economic success by addressing demands while also generating a
profit, resulting in solutions that are scalable and sustainable. For a long time ago,
organizations have realized the significance of shareholder value and took initiatives to
increase shareholder wealth. They continued to place a high priority on the interests of
shareholders to develop value, build trust among stockholders, and attract long-term
investments.
Over time, society's expectations of business have developed, and these changes have
resulted in changes in society's perceptions of the company's role. In addition, today's
businesses operate in a far more highly competitive environment, in a world where traditional
business models are no longer relevant, neither is sufficient, and corporate expectations are
rising. Also, businesses are seen as the main contributor to social problems such as
environmental and economic problems. These issues urged companies to deal differently to
show that they are not thriving at the expense of the rest of society, keep prospering, and
outperform competitors. (Spence & Rushing, 2009) mentioned that “the secret ingredient of
extraordinary companies is purpose”.
(Porter & Kramer, 2011) in their article “Creating Shared Value” redefined this purpose
“generating economic value in a way that also produces value for society by addressing its
challenges” rather than just focusing solely on maximizing the shareholder value. This value -
which they named shared value- “focuses companies on the right kind of profits, profits that
create societal benefits rather than diminish them” (Porter & Kramer, 2011). Thus, refocusing
the controversy over the purpose of business, which had become trapped between two
potentially conflicting positions of shareholder value and stakeholder equity.
Other corporate efforts before the shared value concept failed to capture the real change. So,
we will here try to understand what distinguishes a shared value from prior concepts like
philanthropy and corporate social responsibility (CSR). Also how creating a shared value
(CSV) can contribute to an organization’s success and sustainable competitive advantage.
(Porter & Kramer, 2011) distinguished between the common actions associated with (CSR)
Corporate Social Responsibility and (CSV) Creating Shared Value concept. They stated that
“shared value is not social responsibility, philanthropy, or sustainability; but a new way for
companies to achieve economic success.”
2021-2022 Theory base analysis
Prepared by: Ibrahim Rahal
Instructor: Dr. Ali El Dirani
LEBANESE UNIVERSITY
FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION
, 1
Businesses can generate economic success by addressing demands while also generating a
profit, resulting in solutions that are scalable and sustainable. For a long time ago,
organizations have realized the significance of shareholder value and took initiatives to
increase shareholder wealth. They continued to place a high priority on the interests of
shareholders to develop value, build trust among stockholders, and attract long-term
investments.
Over time, society's expectations of business have developed, and these changes have
resulted in changes in society's perceptions of the company's role. In addition, today's
businesses operate in a far more highly competitive environment, in a world where traditional
business models are no longer relevant, neither is sufficient, and corporate expectations are
rising. Also, businesses are seen as the main contributor to social problems such as
environmental and economic problems. These issues urged companies to deal differently to
show that they are not thriving at the expense of the rest of society, keep prospering, and
outperform competitors. (Spence & Rushing, 2009) mentioned that “the secret ingredient of
extraordinary companies is purpose”.
(Porter & Kramer, 2011) in their article “Creating Shared Value” redefined this purpose
“generating economic value in a way that also produces value for society by addressing its
challenges” rather than just focusing solely on maximizing the shareholder value. This value -
which they named shared value- “focuses companies on the right kind of profits, profits that
create societal benefits rather than diminish them” (Porter & Kramer, 2011). Thus, refocusing
the controversy over the purpose of business, which had become trapped between two
potentially conflicting positions of shareholder value and stakeholder equity.
Other corporate efforts before the shared value concept failed to capture the real change. So,
we will here try to understand what distinguishes a shared value from prior concepts like
philanthropy and corporate social responsibility (CSR). Also how creating a shared value
(CSV) can contribute to an organization’s success and sustainable competitive advantage.
(Porter & Kramer, 2011) distinguished between the common actions associated with (CSR)
Corporate Social Responsibility and (CSV) Creating Shared Value concept. They stated that
“shared value is not social responsibility, philanthropy, or sustainability; but a new way for
companies to achieve economic success.”
