Evaluation of Creating Shared Value

Category: Management

The concept of shared value created in modern economy was examined by numerous observers. They found it various modifications highlighted in the activities and models generated by businesses, although shared value was not progressed. The idea represented in the article of Kramer and Porter is driven by the popularity of the creating shared value among scholar and practical circles. The work fulfils the concept with strong and weak positions. The position of the article is in the distinguished approach to the concept of shared value in contrast to its classic understanding in terms of social responsibility by more focused attention on capitalism reflection and market conditions. 

Value of Customer Relations

Porter and Kramer were confident about the necessity to create shared value in order to respond the needs of customers. While this creation occurs in the market conditions, then the customers are the target group that is the main rationale and landmark of the shared value design. Therefore, new service or product design would represent the development of renewal market opportunities that would boost the social prosperity and a company. If a country is able to create this shared value according to the needs of customer, its economy will be developing among other economies throughout the world.

However, the work of the authors left open question about the social good that remains to be questionable for society. The article did not consider the created shared value for these products by the companies. The vision of this issue may be divided on the opposite followers, especially regarding manufacturing of arms, tobacco, or petroleum. These products have bifacial nature and consequences for society. Therefore, customer relations obtain new color and grow out social responsibility and relate more to capitalism. Despite of realistic reflection of this vision, this approach is weakening as market competition becomes less intensive. In addition, the authors do not interpret customers as the participants in the creation of shared value, but in competition for profit with the companies. This attitude was developed only regarding the suppliers’ power under the manufacturing. Perhaps, the authors wanted to confirm the power of the market situation guided mostly by the customers due to the exceeded supply. 

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Ethical and Regulatory Considerations

The article traces social responsibility as the extent determining the level when a business begins to be blamed for the failures to society. The central notion of this issue is business legitimacy that can be changed through the history of this business function. Thus, the trust in business decreases that leads the politicians to sap economic competition through economic policies undermining competitiveness. Herein, economic and ethical issues are intertwined when facing time factor and type of business conduct. 

Creation of shared value attracts attention of publicity to it as important mission of the corporations as large economic boats, not profit persuasion. Capitalism is noted as the tool to meet the human needs along with creation of additional jobs, wealth and improvement of efficiency. Intention to meet the needs of consumers is stated as opposite to modern ethical considerations of business directed at other goals. If businesses use more fully entrepreneurial potential, they would create shared value, develop innovation, and increase productivity. These factors would be more contributive to their long-term prosperity and accountability rather than other narrowest consideration of capitalism and profit augmenting. Although the businesses excluded regulatory requirements from the economic context of their conduct, it will affect their activities in any possible way.

Economic Significance of Creating Shared Value

Shared value serves as indicator of wasted money and efforts for those items that will not correspond to social needs and result in the form of wasted outcomes. In addition, social orientation of the business includes the adherence to the customers’ needs that will fortify reputation and ensuring profits. Shared value creation is well considered through the cluster organization to support local farmers. Economic benefit of these suppliers might be higher proportionally to their participation in trade operations. The principle of fair trade was given to show that shared value creation is about the correct distribution of incomes instead of expanding the economic pool of value. This vision helps understand the intention of the authors putting forward the creating shared value and participation of economic entities. On other hand, the article advanced the information of supply chain improvement, but it is always focused on the benefits for both sides. 

It should be noted that shared value is suited economic interests of the businesses and social needs of their stakeholders. The examples of great companies attest that income may grow in the case of meeting social and economic needs of employees and communities. However, the article illustrates this through the investment mechanism. As external vendors begin to play more significant roles through the vertical integration, offshoring and outsourcing affect the relations of the companies with their communities. The economic benefits of shared value decrease. 

Purpose Related to Creating Shared Value

The article is concentrated on social outcomes of the businesses. Productivity leading to the added value comes from the creating shared value due to less environmental impact, rational use of energy and natural resources, especially scarce resources, support of supplier viability, exploitation and development of employees’ skills, and ensuring employees’ safety and health. These tools are returned in much more favorable way for the business that do not pursued only profits. Therefore, appropriate companies and surrounding communities get equal and even greater opportunities to grow and improve mutual collaboration. The idea of the humane business is closest to the article rather capitalism, but it did not mention this aspect as the major fact. Therefore, the purpose of the article is to highlight the idea of the creating shared value as the joint efforts directed at balanced relationships of business and society as two aspects of the entire national economics, not as opposite sides of it. This collaboration is in the changed capitalism and emerged innovation that both lead to economic growth.

Arguments and Conclusions for a Specific Firm

The article articulates that businesses and government have social and economic responsibilities that should be executed regarding mutual cooperation and provision of society with modern achievements and benefits.  Although the article emphasizes shared value, it describes the roles of all participants in division of economic effect obtained as the result of beneficial cooperation. It is hard to doubt that this approach does not have positive response in community. However, the role and opportunities of small firms are omitted in the research, as they constitute significant layer in the national economy.

Own Conclusions on Shared Value Creation

Although the article is full of positive and humane context that is justified with the examples of great companies with appropriate experience of creating shared value, the impact of business on communities is not significantly advanced to the readers. The companies are market actors founded and operated for economic purpose determined their further objectives in certain circumstances of economic and social reality. Nevertheless, the article is a good reminder of social responsible reminder that business is a multi-tasked venture that is shaped by economic rationale of the business.

Conclusion

The article devotes the research to the issue of creating shared value from the perspective of capitalism and social responsibility. The difference between the related notions was lined up. Theory of social contract and customer relations intertwined consideration of shared value as independent but complex phenomenon referred to business practice of the companies governing the community and opportunities they provide in markets. Researching shared value is still full of shortcomings, although certain landmarks were interlaid.

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