A R N A B PA R M A N I K ( 1 3 P 1 2 9 )

H I M A N S H U K A S H YA P ( 1 3 P 1 4 2 )

K A RT H I C S U B H R A M A N I A M ( 1 3 P 1 4 7 )

S A N D E E P C H AT T E R J E E ( 1 3 P 1 6 5 )

S H W E TA V E R M A ( 1 3 P 1 7 0 )

V I K R A N T S H A R M A ( 1 3 P 1 8 0 )

GROUP – 9

CREATING SHARED VALUE

Current Practice

• Companies viewed to prosper at the expense of community

• Optimize short term financial performance• Lead to– Depletion of natural resources– Viability of suppliers reduces– Stinted social progress

Shared Value

“Involves creating economic value in a way that ALSO creates value for society by addressing its needs and challenges.”

The purpose of the corporation must be redefined as creating shared value, not just profit per-se.

Moving Beyond Trade-Offs

• Neo classical thinking – social improvement eg. safety/hiring disabled imposes constraint on the corporation

• Externalities – arise when firms create social costs that they do not have to bear eg. pollution.

Thus society must impose taxes to internalize these externalities.

Competitive Advantage & Social Issues

The concept of shared value :• recognizes societal harms as internal costs and

addresses them• need not raise cost, since firms can innovate

and increase their productivity• is about expanding the total pool of economic

and social valueFair Trade Perspective Shared Value Perspective

Increase proportion of revenue to farmers by paying higher prices

Improve growing techniques, strengthen local cluster to increase farmer’s efficiency, yield, sustainability

Farmer’s income increase by 10-20%

Farmer’s income increase by 300%

Studies onCote d’Ivoire

cocoa farmers

• Increasing competition and performance pressure lead managers to – Personnel reduction– Relocation to low cost region

• The results are– Price competition– Commoditization– No innovation– No competitive advantage

Roots of Shared Value

• Firms need community to create demand, provide critical public assets & supportive environment

• Community need firms to provide jobs and wealth creation

• Interdependence means public policies undermining productivity are self-defeating

• Companies have failed to grasp the importance of the broader business environment

• http://youtu.be/aUdPDVO-toMMichael Porter’s insights on shared value

How Shared Value is Created

Reconceiving products and

markets

Redefining productivity in

Value Chain

Building supportive

industry clusters

Reconceiving Products & Markets

Companies have lost sight of basic question: “Is our product good for our customers.”

• Food companies concentrate on taste and quantity to drive consumption. Should refocus on the fundamental need of better nutrition.

• Intel and IBM are using digital intelligence to economize power usage.

• GE’s eco-magination products grossed $18billion sales in 2009

Redefining Productivity Value Chain

Enabling Local Cluster Development

• Clusters foster logistical efficiency, drive productivity & ease of collaboration

• Nestle Nespresso’s productivity improved by building agricultural, tech, financial, logistical firm capabilities in each coffee region

• Most successful cluster development programs are ones that involve collaboration within private, govt., NGOs & trade agencies.

CSR SHARED VALUE CREATION

Focus on reputation, have limited connection to business

Integral to profitability and competitive positioning

Discretionary/ in response to external pressure

Integral to competing

Separate from profit maximization Integral to profit maximization

Impact limited by corporate footprint/ CSR budget

Realigns the entire company budget

Eg. Fair trade purchasing Eg. Transforming procurement to increase quality and yield

Next Evolution of Capitalism

• Growing social awareness of employees and citizens, increased scarcity of resources will drive CSV

• CSV represents a broader conception of Adam Smith’s invisible hand

• Business school curricula need to be broaden to include CSV concepts.

• http://youtu.be/4pcO-AxBrogA recap of shared value