Ch 2 - CSR as the Competitive Advantage (1)

7/28/2019 Ch 2 - CSR as the Competitive Advantage (1)

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CSR as the Competitive Advantage of

Business Finding shared value


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CSR What does it means? CSR is about how companies manage the business

processes to produce an overall positive impact on

society


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CSR can benefits to business and society But CRS first of all can be a source of opportunity,

innovation, and competitive advantage of a

company If company understand the relationship between business

and society in any properly task

CSR can become a source of tremendous social progress,as the business applies its considerable resources, expertise,

and insights to activities that benefit society


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The Emergence of CSRo From the beginning of CSR development it hasnt been

entirely voluntary practice that is why many companies

was surprised when they faced unexpected problemso Nike: boycott of consumers as a response to the issue of

Indonesian supplier who applied abusive practices to its labors

o

Shell Oils: Green peace protested against it decision to sinkobsolete oil rig in the north sea

o Pharmaceutical companies: it was discovered that they

were expected to respond to the AIDS pandemic in Africa.

Even it was far removed from their primary product lines andmarkets.


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Four components of CSR Moral obligation- emphasizes that companies have a duty to be good

citizens and to do the right thing. Companies can fully archive

commercial success only in ways that respect ethical values, people,

communities, and the natural environment (Any weakness?)

Sustainability-emphasizes environmental and community stewardship

Meeting the needs of the present without compromising the ability of future

generations to meet their own needs(Norwegian Prime Minister Gro Harlem

Brundtland, 1980) (Any weakness?) License to operate emphasizes that every company needs implicit or

explicit permission from governments, communities, and other

stakeholders to do business (Any weakness?)

Reputation-justifies CSR initiatives on the grounds and will improve acompanys image, strengthen its brand, liven up it morale, and even can

raise the value of its stock(Any weakness?)


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Successful companies=Healthy society To advance CSR practices of each company, anchoring

them in strategies and activities, its needed to understand

the interrelationships between a corporation andsociety

The mutual dependence of corporations and society

implies that both business decisions and social policiesmust follow the principle ofshared value

That is why a company must integrate a social

perspective into the core frameworks in order tounderstand competition and guide its business strategy


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Approach to advance CSR Identify the points of intersection

Choose which social issues to address

Create a corporate social agenda

Integrate inside-out and outside-in practices

Create a social dimension to the value proposition


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Identify the points of intersection The interdependence between a company and society

takes two forms:

1. inside-out linkages: a company imposes upon societythrough its business operations and creates either positive

or negative social consequences.

Without a careful process for identifying evolving social effects oftomorrow, firms may risk their survival

2. outside-in linkages: an external social conditions also

influence corporations, but either for better or for worse.

Ensuring the health of the competitive context benefits

both the company and the community


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Competitive context areas

1. the quantity and quality of available business inputs

(exp. human resources, or transportation infrastructure)

2. the rules and incentives that rule competition

(exp. policies that protect intellectual property, ensure transparency, safeguardagainst corruption, and encourage investment)

3. the size and sophistication of local demand

(exp. standards for product quality and safety, consumer rights, and fairness in governmentpurchasing)

4. the local availability of supporting industries

(exp. service providers and machinery producers)

Any and all of these aspects of context can be opportunitiesfor CSR initiatives


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Social conditions Social conditions form a key part of competitive

context that has great strategic importance for both

companies and societies, and give to companies theability to carry out its strategy especially in the longrun


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Influence of social factors The ability to recruit appropriate human resources may

depend on a number of social factors that companies can

influence, such as the local educational system, theavailability of housing, the existence of discrimination

(which limits the pool of workers), and the adequacy ofthe public health infrastructure.


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Choose which social issues to addressA company must select issues that intersect with its particular business,

other social issues are better to leave to those who are better positioned

to address them

Generic issue is important for society but doesnt affected by thecompany

Value chain social impacts are significantly affected by the companys

activities

Social dimensions of competitive context are factors in the external

environment that significantly affect competitiveness of the companys

operations

Some issues can be applied widely, some can be applicable and appropriate

only for the specific industry

The more closely social issue tied to the companys business, the greater the

opportunity to leverage the firms resources and capabilities, and benefit society


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Social Issues Challenges

Health care benefits make fewerchallenges for

software development or biotechnology firms, whereworkforces tend to be small and well compensated,

Health care benefits make more challenges for

retailing, which is heavily dependent on large numbers oflower-wage workers.


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Competiveness

Volvo has chosen to make safety as a central elementof it competitive positioning

Toyota has built it competitive advantage from the

environmental benefits of its hybrid technologies


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Effective corporate citizenship initiatives GEs program contributes between $250,000 and $1

million over a five-year period to each underperforming

public high schools, it managers take an active role bysupporting and encouraging students . In the result is

significant improvement within 10 years in all schools and

in addition graduation rate has increased from 30% to

60%.

Society benefit , the company creates goodwill and

improve relations with local governments


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Shared value opportunities arising from

investment Microsoft with American Association of Community

Colleges (AACC) cooperation: Microsoft contributed

products and $50 million within five years and sentemployees voluntary in order to help to the community

colleges to improve their programs and education of the

students.

In the result: many communities benefited from Microsoft

actions, in the same time the company obtained manynew high educated workers


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Integrate inside-out and outside-in in

practice

When value chain practices and investments in

competitive context are stick together these create

powerful tool for creating economic and social value


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Integrating Companys Practice Nestle: the company invested in local infrastructure of

northern district of India, and transferred its support,

knowledge and technologies directly to small farmers. Inresult Nestle produced enormous social benefits, such as

improved health care, education, and entirely life of Indian

farmers, while getting direct access to the commodities it

needs to maintain a profitable global business

In this case Nestl's distinctive strategy is inseparablefrom its social impact


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CSR is important to competitive success Strategy is always about making choices, and success in

CSR is no different

From the information obtained from the case we canconclude that creation of shared value should be viewed

like research and development, as a long-term investment

in a companys future competitiveness Moreover corporate philanthropy would generate many

benefits to both business and society if consistentlyinvested using the principles have outlined


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Conclusion Efforts to find shared value in operating practices and in the social dimensions of

competitive context have the potential not only to foster economic and social

development but to change the way companies and society think about each

other Perceiving social responsibility as building shared value rather than as damage

control will require dramatically different thinking in business, however, CSR will

become increasingly important to competitive success

Corporations are not responsible for all the worlds problems, nor do they havethe resources to solve them all

But each company can identify the particular set of social problems, solve them

and gain the greatest competitive benefit for both society and company


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Contribute to both Business Society!


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Case Try to propose a CSR initiative for any company that you

are familiar with based on our lecture material today

Ch 2 - CSR as the Competitive Advantage (1)

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