Introduction
Kramer’s and Porter’s article Creating Shared Values was an eye opener to businesses on how effective or less effective their business strategies and economic structure were. Companies were so busy trying to get short term financial performance that satisfying the customers’ needs and wants was far from in reach. This caused a tremendous number of trade-offs between economic efficiency and social progress.
The theory creating shared value was designed to bring a balance between business organizations, customers and the health of the communities. There was a great need to make sure that all the different connections between social and economic views would dominate the new ideals in economic growth and capitalism. Capitalism is an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs, and ...view middle of the document...
Companies are stuck in “Social Responsibility” mindset. The solution lies in “Shared Value” which involves creating economic value to create value in the society by addressing needs and challenges. Shared value is about expanded the total pool of economic and social value.
Company’s success can be reconstructed by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company’s locations. Porter and Kramer feel that the government should enable ways to regulate shared value rather than work against it. No company can do things by themselves except it affect the community around it. Clusters are prominent in all successful and growing regional economics and play a crucial role in driving productivity, innovation and competitiveness. It can improve company productivity while focusing on dealing with the failures conditions. As clusters began to form in the communities so does success, growth and we see a rise in employment as well as demand for goods and services.
Created Shared Responsibility (CSR) and Created Shared Value (CSV) are two different things that have been misconstrued over the years. CSR focuses on an organization’s reputation and has limited business connections. CSV should always trump CSR because it produces resources and expertise that create economic value by creating social value.
Conclusion
Porter and Kramer laid the foundation for how shared value was created and how it can be implemented into organizations. The welfare of the business, customer and the community are all weighted upon each other. There should be a balance between the three knowing that the end result is growth and increase in profit. If an organization wants to reconstruct their failing business using the Creating Shared Value theory will be best to help do that.
Reference
Porter, M. E., & Kramer, M. R. (2011). Creating shared value. Harvard Business Review, 89(1/2), 62–77.
