Bus 102
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Creating Shared Value

Shared value is a management strategy that focuses on firms creating business value. This concept is first introduced in the harvard Business article. The author states that there are three ways they we can create shared value. Creating shared value is a concept that is introduced in this article, the definition of creating shared value is the competitive of the firm and the health of our society around are mutually dependent to each other. According to the author, our society is under siege because all sorts of problems involving social, environmental, economic are been viewed as the consequence of business transactions. In recent years, more business has begun to embrace their corporate responsibility, and as a result, many business are been blamed for society’s failures. The author explains that one of the biggest part of the problem is companies themselves have outdated approach to value creation. Because customer needs are usually been ignored and insightful thoughts regarding to long-term success are nearly non-existent, many companies fail their financial and societal expectations. The author suggests the solution to this problem lies in the principle of shared value. By creating economic value as well as creating economic value, we can obtain customers trusts and achieve a high societal status. Shared value is not social responsibility or philanthropy, but rather a new way to achieve economic success. Companies like Google, IBM, and Intel have already spent countless effort to create shared value. Government should learn how to regulate using shared value in order to promote a healthier society and increase national productivity. Profit factor should not be the most crucial factor in a cooperation, companies have to spend an equivalent amount of effort to the concept of shared value.
Externality can be an factor that helps to create shared value for cooperations. Since the cooperation does not bear the responsibility of external factors such as pollution and global warming, society should exert its pressure by imposing taxes, regulation and penalties. By exerting pressure to corporations, they will internalize these externalities. The benefit of this type of approach can spread the idea shared value and usually does not necessarily raise costs for firms since they can always come up with new innovative technology and effective management in order to reduce the societal harms.
The author thinks that the reason why many companies did not embrace the idea of shared value is because in the old time, business serve as the platform to contribute goods and services to society. The profit of the company supports employment, investments and government. This perspective serves as the permeated thinking for the last twenty years. Firms use different marketing strategies to pursue consumers to buy more of their products. As competitions of different firms become more and more fierce, managers becomes more and more morally corrupted. Society receives less and less benefits each time when they buy goods from firms. Companies that do not embrace the idea of shared value become corrupted.
The process of creating shared value is also worth mentioning. Companies can create economic value by first achieving societal value. There are three ways to achieve societal value. First, by reconceiving products and markets. Firms must understand thoroughly what the product can bring to their customers and whether if the product can survive in the market. Second, redefining productivity in the value chain. The company should find an equilibrium state by producing a reasonable amount of products that suits the consumers demand. Third, building supportive industry clusters at the company's locations. Companies should product authentic and socially beneficial products to the society.
A nice organized government have the right kind of regulation that can encourage companies to pursue shared value. Government regulations serve as the cornerstone for a well-functioning market. Regulations can set goals and stimulate innovations for shared value. Society goals such as regulating energy use, health matters ,or child safety can help companies to set their goals according to the standards. Since there are always competition in the market, companies will exceed their potentials and try to achieve more goals in order to be superior than their competitors. Despite many companies will likely to show compliance to well-constructed regulation, some old mind-set firms will reject some regulation. The author uses an example of the