Creating Shared Value

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    Anonymous User39Anonymous User39
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    “The concept of shared value – which focuses on the connections between societal and economic progress – has the power to unleash the next wave of global growth” – Michael E. Porter

     

    Companies such as Google, Wal-Mart, Nestlé and Johnson and Johnson are synonymous with having hard-nosed business policies for years upon years. Nowadays, such companies are beginning to embark on shared value initiatives. It makes sense for a company, such as Google, to want to satisfy customers’ needs as well as rising their profits. This is profitable for every stakeholder involved in these business relationships.

     

    How can companies create an environment where shared value is a priority? This key to creating societal value is to create economic value. This is done in three steps; reconceiving products and markets, redefining productivity in the value chain and building supportive industry clusters.

     

     

    The first step in the process of creating shared value is to reconceive products and markets. Today’s society has multiple needs, such as healthcare, housing and elderly care. Usually, companies direct their focus on things such as higher profits and they forget to ask themselves; “Is the product good for our customers?” For many years, McDonalds’ focused on taste and quantity to raise levels of consumption but now such companies are refocusing to provide healthier food. This concept is profitable to both businesses and customers because, firstly, customers are more satisfied as they are receiving better products and from this company’s sales will rise further.

     

    The second step of this process is to redefine productivity in the value chain. Societal factors have an effect on value chains. Take, for example, a company using an excessive amount of packaging. This is detrimental to the company and the environment. Evidently, this is not profitable to any of the stakeholders. Wal-Mart is a good example of a company successfully implementing this step. In 2009, Wal-Mart reduced its packaging extensively and also reduced its delivery routes by 100 miles. They saved $200 million and their profits skyrocketed. This is another example of shared value being profitable and valuable to every stakeholder.

     

     

    “No compnay is self-contained”

    The final step in the process of creating shared value is to build supportive industry clusters. As Porter comments, “No company is self-contained.” All companies are dependant on external factors such as suppliers, service providers agus related businesses. Companies also are depnedant on wider public resources and because of this it is imperative that companies concentrate on shared value. The company and the surrounding community are intertwined deeply. It is good practice that the company’s related businesses also follow the same shared value. Johnson and Johnson are an appropriate example of this vital step in the making of the shared value concept.

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