Assignment 2: Creating Shared Value
Porter and Kramer (2011) believe that capitalism is being threatened by the new rising phenomenon that is Creating Shared Value (CSV). Creating shared value is the idea that the competitiveness of an organization and the well being of its local community are mutually dependent, with the latter being integral to the long-term heal of the company. If an organization wants to succeed long-term, it has to look toward helping its community flourish (Porter and Kramer, 2011).
Porter and Kramer argue that companies shouldn’t act as if they work in isolation to their surrounding communities as they are in need of them to survive and then prosper. One example of this is that an organization may want to look after its surrounding community as they may be in need of a reliable local supplier, a functional infrastructure and access to a highly talented pool of candidates. If organisations keep the societal responsibilities on the peripheral of their company, they may lose out on all of these opportunities, thus losing out on longer-term profits whilst chasing short-term cash. This shows that organisations do not think broadly enough, ignoring vital customer and community needs, which may bring about longer-term success. Porter and Kramer have likened creative shared value to corporate social responsibility, but believe that CSV should be about achieving economic success by focusing on the creative value of the society. Creating shared value should be seen as setting out policies and strategies that are aimed at improving a companies competitiveness whilst simultaneously enhancing the social and economic conditions of its surrounding community in which they operate in.
Porter and Kramer believe that most organisations understand what creating value is, but ignore the need for value to be created within the society, usually looking at societal issues with a different perspective than business issues. The CSV approach has been adopted by some leading organisations such as Intel, Google and Nike, with the latter investing $95.5 million dollars into the communities they operate in over the last two years, according to their community report (Nikeresponsibility.com, 2015). Kramer and porter argue that organisations such as Nike do not do this out of philanthropy, but to gain societal respect back, generating more loyal customers who can help generate more sustainable profits. This may help an organization such as Nike who came under scrutiny from the local Governments and the press for their alleged exploitation of Indonesian workers (Mail, 20111), with Governments using the fact that large companies are ignoring societal needs, aggravating the problem further which caused damage to the brand/company image.
Porter and Kramer believe that organisations should be co-operating with each other and with governments alike to help with sustainability. However, Creating Shared Value has been said by Porter and Kramer to be an effective tool in which organisations can create sustainable profits, thus creating a competitive edge. This ties in with Porter’s previous model on the 5 forces, focusing on gaining a competitive advantage (Porter, 2008), (Porter, 1980). However, both this model and CSV when looked at from a competitive advantage point of view are totally opposite to the view that organisations should start co-operate to allow for sustainability (Strand, 2014). This is because a sustainable, co-operative environment would not allow for competitive edge, as the organisations would not be competing against each other. Also, Strand continues to add that CSV looks for managers to address the corporate objectives, aiming to please all stakeholders which, in real terms, means that they will have to forget their own goals of ‘meeting targets’ which means that CSV may not work well in practice. Also, Crane and Matten (2014) believe that CSV is ‘based on a shallow conception of the corporations role...
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