STRATEGY AND SOCIETY: THE LINK BETWEEN COMPETITIVE ADVANTAGE AND CORPORATE STRATEGY

Michael E. Porter&Mark R. Kramer

The Emergence of CSR

Increasing attention to CSR from governments, activists, media, and others

Companies are being held accountable. For example, Nike faced an extensive consumer boycott after New York Times reported abusive labor practices in early 1990s

Four prevailing justifications for CSR

Moral obligation

• Companies have a duty to be good citizens and to do the right thing

Sustainability

• Meeting the needs of present without compromising the ability of future generations to meet their own needs

License to operate

• Every company needs tacit or explicit permission from government to do business

Reputation

• To justify CRS activities on the grounds that activities will improve companies image

Presumption of Conflict

Traditional approaches assume that companies and society are in conflict

Pits business against societyA zero-sum gameThis is counterproductive, since the two are

interdependentCompanies fail to recognize the importance of

CSR in their strategies

Proactive Framework

In the past, CSR was treated more as an unavoidable cost

• To identify possible social consequences of action• To discover opportunities to benefit society and themselves• To discover CSR initiatives to address• To find the most effective way to do so

Better if viewed as a potential competitive advantage

Presents a framework

Categorizing Corporate Social issues

Strategic Approach to CSR

Generic Social Impacts

Value Chain Social Impacts

Competitive Context

Good citizen Mitigate harm from value chain

Strategic philanthropy

ResponsiveCSR

Transform value chain activities Strategic

CSR

Framework for Strategy and Society

Looking inside out: Identify positive and negative social impacts of activities engaged in while doing business

Looking outside in: Societal impacts on a corporation’s competitive context and success in what it does◦There will be points of intersection where

there could be problems and/or where there could be opportunities

Porter’s Generic Value Chain

Looking Inside Out: Managing social impact of value chain activities

Porter’s Diamond Framework

Looking Outside In: Social influences on competitiveness

Context for Firm Strategy and Rivalry

Related and Supporting Industries

Factor (Input) Conditions

Local Demand Conditions

Integrating Strategy and Society

Responsive CSR

• Act as a good corporate citizen• Mitigate harm from value chain activities

Strategic CSR

• Identify a small number of social impacts where the company• Can make a significant contribution to society while improving the• Long-term competitiveness of its business• Create a social dimension to the value proposition

Benefits of the Integrative Framework

Identifying the points of intersectionChoosing which social issues to addressCreating a corporate social agenda

◦ “Responsive CSR” ◦ “Strategic CSR” (when CSR is incorporated into

strategy)Creating a social dimension to the value

proposition >>such that the value it offers to its customers also has a positive social impact

Strategic CSRIntegrating External Context and Strategy: Nestlé in India

Nestlé entered Moga in 1962, when the region was in severe poverty

Local milk supply was hampered by small parcels of land, poor soil, periodic droughts, animal disease, and lack of a market

Nestlé established local milk purchasing organizations in each town

Strategic CSRIntegrating External Context and Strategy: Nestlé in India

Nestlé invested in improving competitive context– Collection infrastructure such as refrigerated dairies

was accompanied by veterinarians, nutritionists, agronomists, and quality assurance experts to assist small farmers

– Medicines and nutritional supplements to improve animal health

– Monthly training sessions for local farmers– Wells to secure water supply for animals were dug

with financing and technical assistance from Nestlé

Strategic CSRIntegrating External Context and Strategy: Nestlé in India

Nestlé has built a productive milk cluster in Moga sourcing milk from 75,000 farmers through 650 dairies

Moga has much improved social conditions and a far higher standard of living

Nestlé has developed a long-term competitive advantage in the milk cluster in numerous developing countries

Organizing for CSR Unify corporate giving and CSR Engage operating management in identifying value

chain impacts and social dimensions of the competitive context

Incorporate social performance metrics into overall business measurement

Measure the social impact of company activities, not just stakeholder satisfaction

Companies need to shift CSR from a fragmented, defensive posture to an integrated, affirmative approach

The Moral Purpose of Business

The most important thing a corporation can do for society is to contribute to a prosperous economy

Corporations are not responsible for all the world’s problems, nor do they have the resources to solve them all

Business has the tools, capabilities, and resources to make a far greater positive impact on social issues than most other institutions

Business is more transparent and more accountable than most foundations and NGOs

Addressing social issues through shared value strategies will lead to self-sustaining solutions

Thank You

Submitted by:Group 3 | Section C

Amit Agarwala 12P124Apoorva Dave 12P133

Mayank Sharma 12P150Rajesh Kumar Chaudhary 12P158

Rishabh Nagori 12P163Varun Gopal 12P174