Shared value as an element of business management

The creation of shared value must spearhead the next wave of innovation and growth in the global economy. In order for companies to generate shared value, there are different strategies to develop that will be mentioned later.

shared-value-business-management-element

Human activity in the industrial and business sense has become a generator of social and environmental problems, to which we must also add the current economic crisis in which the world finds itself.

It is not a secret that people no longer trust companies, because a large part of the problems lie in them, this due to their ambition to generate wealth only for a few, based on the creation of benefits optimizing financial performance to short term, leaving aside the real needs of customers and social welfare.

Michael Porter and his colleague Mark Kramer, think they have found a solution for the economic situation that is currently being experienced:

Companies and society have a duty to join forces to obtain a common benefit, this is the principle that they have called " Shared Value ", and which differs from philanthropy, sustainability and social responsibility, since it is a strategy for companies can regain their economic value while providing a benefit to society.

For companies to be successful they must align their operations with social progress.

To know the subject in a more visual way, I invite you to watch the following video:

Meaning

Companies could bring business and society back together by redefining their purpose of creating economic value that generates "shared value" in a way that also produces value for society by addressing its challenges. A shared value approach reconnects the success of the company with social progress. Porter & Kramer (2011)

The creation of shared value is a path that provides large companies with the generation of a wave of growth that allows them to obtain economic, environmental and social benefits. Companies must redefine their strategies so as not to generate wealth only for their shareholders, but also for society, they must be integrated as a single entity.

Shared Value must be understood as a management strategy that is based on the creation of measurable business value within the company, through the identification and solution of social problems that are intertwined with its operations. The creation of Shared Value instead of focusing on softening the damages generated by its operations, focuses on the innovation of the processes to promote social progress.

Then the Shared Value serves to define the role that companies should play within society, considering that their functions go far beyond Corporate Social Responsibility.

Evolution

Philanthropic Activities

The first approach of companies with society was through charitable or philanthropic activities. This due to the need to create a link with the society in which it operates since the same society began to demand a return for the exploitation of its resources. The most common activities developed by companies were:

Housing Recreation areas

Meals Medical tests

Food Recreational Events

Corporate Social Responsibility (CSR)

Later, Corporate Social Responsibility was developed, which implies a greater commitment to share with the community, but still constrained by the limits imposed by the demands of shareholders to generate greater profits. The emergence of this is mainly due to government initiatives, which tried to guarantee:

That the operations of companies - mainly multinationals - are developed in conjunction with public policies Increase trust between company and society Improve the social climate to favor foreign investment and thus increase the contribution of multinationals to sustainable development.

Even the Mexican government declares that social welfare is a task for multinational companies. Some of the strategies most used by multinationals are:

Community activities

Training of inhabitants

Investment in schools

All these activities configure larger social commitments that allow multinationals to develop their activities in a much more peaceful way with the inhabitants.

Shared value

This is how Shared Value is created, through which companies must align their ability to create value with the needs of society. When both things occur at the same time, then we say that value has been created for society.

In order to understand the satisfaction obtained with the community, the time horizon in which the needs will be satisfied must be sought. Philanthropic activities satisfy the population for an extremely short period of time, usually for a day or a few hours, the

Corporate Social Responsibility for a longer period, from one to five years, for example. Shared Value should provide a problem-solving experience that is permanent, that is, for life.

Creation of Shared Value

The creation of shared values allows generating new opportunities for companies, civil organizations, governments and society, to take advantage of the power of competition to face social and environmental problems. Porter and Kramer mention that for companies to generate value, they must focus on three strategies, which are mentioned below

Methodology

There are three ways or strategies that serve to create shared value, they are the following:

Acknowledge

Products & Markets

Redefine the

Value chain

Develop

Local Clusters

Recognize Products & Markets

As for the markets, these must be defined by the needs that have not yet been satisfied and by the social ills they present, this allows focusing the development of profitable products or services that attack these conditions.

Redefine Productivity in the Value Chain

The social and environmental limitations of the company's value chain must be addressed, in this way an increase in productivity is achieved, not only in the company but also with its suppliers.

An example of this strategy is the development applied by Walmart, which reduced the number of packages and sought to optimize delivery logistics, achieving savings of two hundred million dollars in distribution costs, increasing the efficiency of its The distribution chain also allowed him to increase the capacity of weekly shipments.

Development of "Local Clusters"

It is based on strengthening the competitive environment in those regions that turn out to be key to the company's operations, in such a way that they contribute to growth and increased productivity.

The creation of Competitive Value defines a new role for businesses in society, going far beyond the traditional models of Corporate Social Responsibility, since it is not focused on reducing damage to the company's existing operations, but that Shared Value strategies must be embedded at scale and innovation to promote social progress. At the same time, it offers the opportunity for other actors to collaborate in defining the social impact.

Success stories

Alicorp

It is a consumer goods company, considered the largest in Peru, operates in North, Central and South America, it was founded in 1956. For some years it has made efforts not to be simply a food producer but a generator of valuable nutrition.

Its main efforts are focused on developing campaigns so that mothers can better feed their children, by supporting the community on issues related to nutrition, as well as offering food that meets the real needs of its consumers, in this way creates value for society. Its Value generation model is structured as follows

Its operations are respectful with the environment, seeking to reduce the impacts generated by its activities and the efficient use of resources:

Reduction of Packaging Materials, Energy Savings, Environmental Management Indicators, Progress Reports on Environmental Goals.

Its health and nutrition initiatives are focused on promoting healthy habits and lifestyles for its consumers, employees and society:

Consumers and Society Collaborators

General Electric

The American company General Electric, was in trouble due to the cost and scarcity of energy, so a concern arose to manufacture more efficient motors, that is, to allow them to include hybrid and electric motors, as well as go from being a company production company has to align its capacity to create value with the needs of society. Shell

The transnational Shell is an Anglo-Dutch hydrocarbons company that is focused on the oil and natural gas sectors, as well as the refining of gasoline. Devoting itself to its business in a conventional way was distancing it from the taste of consumers, becoming an energy company, investing in renewable and clean energy generation options such as solar and wind.

Nestle

Nestlé has made various efforts and has even established 39 shared value goals by 2020 in its production process, with adaptations and possible solutions to social and environmental problems in its community, market and value chain.

Creating Shared Value begins with understanding that for the company to prosper in the long term, the communities it serves must also prosper, thus the business will grow and society will benefit if the company can:

Develop products and services that meet the needs of society in developed and developing countries Use resources more efficiently along the entire value chain Improve conditions for local development at the economic and Social.

Nestlé mentions that it is best positioned to create shared value in three areas:

Nutrition

Water

Rural development

Nutrition

It attacks this area by supplying nutritious products that provide real benefits for the health of its consumers, as well as seeking to make the products it offers more affordable and accessible through innovation and teamwork.

Water

It focuses on the protection of water resources, using water more efficiently in production and distribution processes.

Rural development

The company supports agricultural development in rural areas where the raw materials it requires to manufacture its products grow, in this way it can guarantee continuous access to quality contributions

For the company, the Creation of Shared Value consists of guaranteeing their competitiveness and long-term commercial success, their commitment allows them to identify themselves as a company that systematically undertakes actions to generate value not only for themselves, but for supplier companies. of inputs, their consumers, employees and families, as well as the communities where they live.

conclusion

Finally, it can be concluded that shared value is a strategy that arises as an alternative to the conventional work methods of companies that should undoubtedly remain in the past, since by implementing the Value Creation methodology it is intended to increase safety of companies not for an annual or monthly period, but for the long term and guarantee safe and quality investments.

Sudden and constant changes in consumers, make companies need to constantly seek the creation of innovations to stay current in the preference of consumers, electronic media, communication and various tools that allow interaction in real time allow you to follow companies that have sufficient skills to become a sustainable company afloat.

Thesis proposal

Creation of an advisory company focused on the creation of Shared Value in Latin American companies through the integration of a clean economy.

General objective

Develop a business model for the creation of a Shared Value advisory company.

Reference sources

Garcidueñas, P. (March, 2017). What is shared value? May, 2018, from Expok Website:

King, K. (2012). Shared value. Michael Porter's theory. May, 2018, from Gestiopolis Website:

Merzthal, J. (April, 2013). The creation of shared value: beyond philanthropy and CSR. May, 2018, from ESAN Connection Website:

www.esan.edu.pe/conexion/actualidad/2013/04/11/creacion-valorcompartido-filantropia-rse/

Porter, M. & Kramer, M. (January, 2011). Creating Shared Value. May, 2018, from Harvard Business Review Website:

Writing My Finance Online. (October, 2011). Michael Porter and his theory of creating shared value. May, 2018, from My Online Finance Website:

Nestlé newsroom. (September 2013). The creation of shared value in detail. May, 2018, from Nestlé Website:

Riquelme, M. (April, 2015). What is Shared Value? May, 2018, from Web & Empresas Website:

Vilariño, A. (February, 2011). Creation of shared value. May, 2018, from Compromiso Empresarial Website: https://www.compromisoempresarial.com/ otros / 2011/02 / creacion-de-valor-shared /

Ministry of Economy. (May, 2016). Corporate social responsibility. May, 2018, from the Ministry of Economy of Mexico Website:

www.gob.mx/se/articulos/responsabilidad-social-empresarial-32705.

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