Strategy and society (Michael Kramer model)

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A new model for companies to choose CSR activity and thereby creating a competitive advantage.

Published in: Business, Economy & Finance

Strategy and society (Michael Kramer model)

  1. 1. STRATEGY AND SOCIETY THE LINK BETWEEN COMPETITIVE ADVANTAGE AND CORPORATE SOCIAL RESPONSIBILITY
  2. 2. THE ISSUE OF CSR VS BUSINESS PERFORMANCE HAS BEEN A LONGSTANDING DEBATE Key Questions Are corporates responsible for social consequences of their activities? Are business and society interdependent ? Prevailing approaches to CSR too generic? Is there a framework to evaluate the effects companies have on society? Can CSR be more that a cost, a constraint, or a charitable deed?
  3. 3. EMERGENCE OF CORPORATE SOCIAL RESPONSIBILITY Not always voluntary Focuses on tension between business and society rather than on their interdependence- complete disconnect form company’s strategy Corporate’s approach Focuses on tension between business and society rather than on their interdependence- complete disconnect form company’s strategy Moral Obligation. Sustainability. License to Operate. Reputation Ex: honesty in filing financial statement. Cannot weigh social benefit against financial cost, Ex: moral principles cant tell pharmaceutical companies where to allocate resources to develop cures for future Ex: McDonald's new practices to wrap its food. It is very vague, Ex: transparency may be more sustainable than corruption & good employment practices can be very sustainable Ex: chemical company having license to operate. But these are short term, Ex: forbearance of their neighbor may be short lived Ex: Energy company’s social responsibilities in form of insurance. Company rarely finds the strategic benefit that it is seeking, leading to high profile cause related marketing campaigns, of crisis there would still be public criticism Ex: in event
  4. 4. INTEGRATING BUSINESS AND SOCIETY (PORTER AND KRAMER’S THEORY) Large level of Interdependence between Business and Society • Successful corporations need a healthy society • And healthy societies needs successful companies Value Chain impact on CSR Activities • Every aspect of a company’s value chain comes in contact with the society either in a positive or negative manner. • A company can strategise its CSR through mapping its value chain touch points on society Both business decisions and social policies must follow the principle of shared value creation Inside Out Activities in the Firm’s Value Chain Outside In Competitive context for firms *Bajaj Auto is a great example of this as it has been able to create shared value through its women and people empowerment programs (Inside Out) and its Rural development projects (Outside in)
  5. 5. MAPPING COMPANY VALUE CHAIN TO CSR: LOOKING INSIDE Support Activities Firm Infrastructure Human Resource Management Technology Development Primary Activities Procurement Emissions, Congestion, Accident Inbound Logistics Operation s Biodiversity impact, Energy & Water Waste Outboun d Logistics Marketing and sales Transport Impacts, Improper packaging After Sales Service Pricing , False Advertisement s Disposal of Obsolete Products, Customer Privacy
  6. 6. MAPPING THE DIAMOND TO CSR: LOOKING OUTSIDE *Availability of Human Resources *Access to research Institutions and universities * Efficient Physical Infrastructure Context for Firm Strategy and Rivalry Related and Supporting Industries *Availability of Ancillary Industries *Presence of Clusters *Presence of Related Firms *Fair Competition (absence of trade barriers) *IP Protection Transparency (Financial Reporting) Rule of law Local Demand Conditions Factor Conditions *Sophistication of Local Demand *Regulatory Standards *Unusual Local needs that can be served nationally
  7. 7. CHOOSING WHICH SOCIAL ISSUES TO ADDRESS Generic Social Issues • Social Issues that are not significantly by a company’s operations • Has no material effect on long term competitiveness Value Chain Social Impacts Social Dimensions of Competitive Context • Social issues that are significantly affected by a company’s activities • Touch points between society and value chain • Social issues in the external environment that significantly affect drivers of competitiveness • Effects are generally long term
  8. 8. CHOICE OF SOCIAL ISSUES: APPROACH Carbon Emission AIDS pandemic in Africa Supporting a Dance Company Financial Institution Eg. Bank Retailer Eg. Walmart Value chain social impact Automobile manufacturer Eg. Toyota Competitive context Transport base company Eg. UPS Pharmaceutical company Eg. Glaxo Smith Kline Mining company. Eg. Anglo American Electricity Supply Company Eg. Edison An Arts, Music and Craft promoting company Generic Issues Credit company American Express Promoting Vocational Education Telecom Major Eg. Bharti Airtel Information Technology Services Firm Eg. HCL tech Tyre Company Eg. MRF Tyres • These choices will vary from industry to industry , Among SBU’s, and among locations. Eg. Volvo safety vs Toyota Environment • Need to Integrate All three objectives. Example. ITC e-Choupal
  9. 9. CREATING A CORPORATE SOCIAL AGENDA An Affirmative Corporate Social Agenda moves from mitigating harm to reinforcing corporate strategy through social progress Responsive CSR Company Corporate Citizenship Reduce/mitigate Value chain causes of Harm Strategic CSR Strategic Social efforts that leverage company capability to improve competitive context Transform value chain activities to benefit society while reinforcing strategy Good Citizenship Responsive CSR Mitigate vale chain activities causing harm Strategic Social efforts that leverage company capability Transform value chain to benefit society Strategic CSR
  10. 10. CREATING A SOCIAL DIMENSION TO THE VALUE PROPOSITION Unique Value Proposition Lies at the heart of every strategy. A set of needs that only the company can meet The Most Strategic CSR occurs when a company adds a social dimension to its value proposition Whole Foods Market Unique Value Proposition Sell, Organic, natural and healthy food products to customers who are passionate about food and the environment Social Dimension *Critical analysis of procured ingredients to weed out unhealthy or environmentally damaged ones *Use of Unbleached and Unbromated Flour *Use of Environment Friendly energy *Turning Bio-Degradable waste into Biofeuls
  11. 11. THANK YOU

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