PURPOSE:The concept of creating shared value (CSV) was articulated by Michael Porter and Mark Kramer. They describe it as “Creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success.”34 This approach to business is especially relevant in today’s business world as the connection between businesses and their customers becomes stronger through social media attention and easy access to information on the internet. Many customers not only care about the product or service value but also want to know how the company operates and what it stands for. From the company’s perspective, it is also very important to understand that not all profit is equal. Porter and Kramer state, “Profits involving a social purpose represent a higher form of capitalism—one that will enable society to advance more rapidly while allowing companies to grow even more. The result is a positive cycle of company and community prosperity, which leads to profits that endure.” Explain the picture below. Some critics have contended that CSV is essentiallythe same as corporate social responsibility(CSR). 3 But Porter and Kramer maintain that CSRis a different concept. For example, CSR is oftenperceived primarily as a cost center, while CSV isfocused on new business opportunitiesthat create new markets, improveprofitability, and strengthencompetitive positioning. CSR isabout responsibility; CSV is aboutcreating value.HOW IT WORKS:There are three distinct ways in which acompany can create shared value:1. Reconceive value and markets: meetingsocietal needs through productsand serving unserved orunderserved customers.2. Redefine productivity inthe value chain: utilizingresources, energy,suppliers, logistics, andemployees differently.3. Improve the localand regional businessenvironment: improvingskills, supplier base, regulatoryenvironment, and supportinginstitutions that affect the business;strengthening the cluster on which thecompany depends.Strengths: CSV connectsstrategy and social goals. Itsounds like an appealing way toachieve societal goals that helpsit get adopted and may improveits chances for success. Corporationssee societal issues as opportunities toimprove economic performance rather than asdisconnected external threats.9 Limitations: CSV requires a change inmind-set from focusing primarily on profitsto a higher level of thinking about meetingsocietal needs and being sustainable. Therewill always be tension within a businessbetween its economic and social goals.Often, when the choice presents itself,leaders will choose the economic goals (i.e.,higher profits).Role of the management accountant:Management accountants can identifyparts of the organization's value chain thatmay have opportunities for creating sharedvalue, such as clustering the company'sand suppliers' operations near each other.Management accountants can play a vital rolein CSV especially in the area of measuringshared value.10 .

Shared value is created when companies focus on their business practice and at the same time address…

Answered: The concept of creating shared value…

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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PURPOSE:The concept of creating shared value (CSV) was articulated by Michael Porter and Mark Kramer. They describe it as “Creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success.”34 This approach to business is especially relevant in today’s business world as the connection between businesses and their customers becomes stronger through social media attention and easy access to information on the internet. Many customers not only care about the product or service value but also want to know how the company operates and what it stands for. From the company’s perspective, it is also very important to understand that not all profit is equal. Porter and Kramer state, “Profits involving a social purpose represent a higher form of capitalism—one that will enable society to advance more rapidly while allowing companies to grow even more. The result is a positive cycle of company and community prosperity, which leads to profits that endure.”

Explain the picture below.

Some critics have contended that CSV is essentially
the same as corporate social responsibility
(CSR). 3 But Porter and Kramer maintain that CSR
is a different concept. For example, CSR is often
perceived primarily as a cost center, while CSV is
focused on new business opportunities
that create new markets, improve
profitability, and strengthen
competitive positioning. CSR is
about responsibility; CSV is about
creating value.
HOW IT WORKS:
There are three distinct ways in which a
company can create shared value:
1. Reconceive value and markets: meeting
societal needs through products
and serving unserved or
underserved customers.
2. Redefine productivity in
the value chain: utilizing
resources, energy,
suppliers, logistics, and
employees differently.
3. Improve the local
and regional business
environment: improving
skills, supplier base, regulatory
environment, and supporting
institutions that affect the business;
strengthening the cluster on which the
company depends.
Strengths: CSV connects
strategy and social goals. It
sounds like an appealing way to
achieve societal goals that helps
it get adopted and may improve
its chances for success. Corporations
see societal issues as opportunities to
improve economic performance rather than as
disconnected external threats.9

Limitations: CSV requires a change in
mind-set from focusing primarily on profits
to a higher level of thinking about meeting
societal needs and being sustainable. There
will always be tension within a business
between its economic and social goals.
Often, when the choice presents itself,
leaders will choose the economic goals (i.e.,
higher profits).
Role of the management accountant:
Management accountants can identify
parts of the organization's value chain that
may have opportunities for creating shared
value, such as clustering the company's
and suppliers' operations near each other.
Management accountants can play a vital role
in CSV especially in the area of measuring
shared value.10 .

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