Business Strategy & Sustainability: Paper Summaries
Week 2: Competition: profitability and strategic positioning
2.1. Porter & Kramer (2011) Creating shared value: how to reinvent capitalism & unleash wave of innovation &
growth
Business increasingly viewed as major cause of social, environmental and economic problems
Companies prosper at expense of community
Companies view value creation as optimizing ST financial perf
Disregard influences that determine LT success
Companies > take lead to bring business & society back
Solution: principle of shared value = create econ value & create value for society, address its needs
Shared value is not social resp., philanthropy etc.., it’s a new way to achieve econ success
Realizing shared value means companies need appreciation of societal needs…
Gov also should regulate in ways that enable shared value, not work vs. it
Neoclassical thinking > req for social improvement imposes constraint on corp
This shaped firm strategies, excluded social and environmental considerations
Problems ceded to govs and NGOs
Shared value = societal - not just economic - needs define markets
Social harms create internal costs (wasted energy, accidents…)
Addressing these harms doesn’t necessarily raise costs -> innovate through new tech, methods…
= expand total pool of econ and social value
Redistribution (R) vs. Shared Value (SV)
R: fair trade aims to increase prop of rev to poor farmers by paying higher prices for same crops
More about R rather than expansion of value created
• SV: improve growing techniques + strengthen local cluster of suppliers to increase efficiency, product,
quality…
• > bigger pie of revenue & profits, mutually beneficial
• Ex. Cocoa farmers Ivory Coast
• Fair trade: incomes increased 10/20%, SV investments can raise more than 300%
• Businesses need a successful community, community needs successful businesses
• Old narrow view > business contributes to society by making profit, wages, employment…
• entice customers to buy more and more
• > price competition, little true innovation, slow organic growth
• Strategy: companies must create unique value prop that meets needs of set of customers
• companies overlooked opps to meet societal needs, misunderstood how societal harms affect value chains
How SV is created
• Create econ value by creating societal value
• three ways of doing so
• 1. Reconceiving products and markets
• lost sight of most basic question: is our product good for our customers?
• Demand for societally good products is growing
• Ex. food companies > better nutrition rather than taste & quantity
• Ex. Intel & IBM devising ways to help utilities harness digital intel to economise on power usage
• Whole new avenue for innovation, SV is created
• Dev countries not recognised as viable markets, opps also in nontraditional communities in advanced countries
• High profits + societal benefits of providing appropriate products to lower-income
• Ex. cheap cell phones with mobile banking services save money
• India > Thomson Reuters dev promising monthly service for farmers earning avg 2,000/yr
Week 2: Competition: profitability and strategic positioning
2.1. Porter & Kramer (2011) Creating shared value: how to reinvent capitalism & unleash wave of innovation &
growth
Business increasingly viewed as major cause of social, environmental and economic problems
Companies prosper at expense of community
Companies view value creation as optimizing ST financial perf
Disregard influences that determine LT success
Companies > take lead to bring business & society back
Solution: principle of shared value = create econ value & create value for society, address its needs
Shared value is not social resp., philanthropy etc.., it’s a new way to achieve econ success
Realizing shared value means companies need appreciation of societal needs…
Gov also should regulate in ways that enable shared value, not work vs. it
Neoclassical thinking > req for social improvement imposes constraint on corp
This shaped firm strategies, excluded social and environmental considerations
Problems ceded to govs and NGOs
Shared value = societal - not just economic - needs define markets
Social harms create internal costs (wasted energy, accidents…)
Addressing these harms doesn’t necessarily raise costs -> innovate through new tech, methods…
= expand total pool of econ and social value
Redistribution (R) vs. Shared Value (SV)
R: fair trade aims to increase prop of rev to poor farmers by paying higher prices for same crops
More about R rather than expansion of value created
• SV: improve growing techniques + strengthen local cluster of suppliers to increase efficiency, product,
quality…
• > bigger pie of revenue & profits, mutually beneficial
• Ex. Cocoa farmers Ivory Coast
• Fair trade: incomes increased 10/20%, SV investments can raise more than 300%
• Businesses need a successful community, community needs successful businesses
• Old narrow view > business contributes to society by making profit, wages, employment…
• entice customers to buy more and more
• > price competition, little true innovation, slow organic growth
• Strategy: companies must create unique value prop that meets needs of set of customers
• companies overlooked opps to meet societal needs, misunderstood how societal harms affect value chains
How SV is created
• Create econ value by creating societal value
• three ways of doing so
• 1. Reconceiving products and markets
• lost sight of most basic question: is our product good for our customers?
• Demand for societally good products is growing
• Ex. food companies > better nutrition rather than taste & quantity
• Ex. Intel & IBM devising ways to help utilities harness digital intel to economise on power usage
• Whole new avenue for innovation, SV is created
• Dev countries not recognised as viable markets, opps also in nontraditional communities in advanced countries
• High profits + societal benefits of providing appropriate products to lower-income
• Ex. cheap cell phones with mobile banking services save money
• India > Thomson Reuters dev promising monthly service for farmers earning avg 2,000/yr
