Capitalism and a Wave of Innovation - Book Report/Review Example

Capitalism and a Wave of Innovation The article is about how capitalism is under siege. Primary reason of the overview is to bring to an agreement the companies and the society since from time immemorial, business has been viewed as the cause of socio-political, environmental and economic meltdown. In the same regard, having a shared value which entails economic value that brings the solution by addressing the needs and the problem of the society is the principle solution. The overview is to address the companies to put the interest of the society first in their success and have shared values which can give rise to the next major improvement in the business world. This will greatly enhance a good correlation between the society and the firms. Abstract The article was published in 2011, and it was written in regard to the business being viewed in recent years as the primary reason for environmental, socio-political and economic meltdown. Many companies have prospered in expenses of the community. In this regard companies have set a cliché to bring them in agreement. A Shared value which entails economic value creation is the principle solution that brings value addition to the society by addressing the setbacks and the needs of a society. The author argues that success of a company must have the society progress in mind. Shared value is a way to achieve economic success rather than economic meltdown. In the same regard, it is the epicenter of companies’ profile and can give rise to next major paradigm shift of business. Summary Moving beyond takeoff Society and business have relied on one another. For most companies, to benefit the society, they must exploit their economic success. Constraint addition to a firm with supernormal profit will lower them according to neoclassical theorist. Externalities result from a company creating social cost that they do not necessarily have to bear and thus imposes taxes and penalties that are too harsh for the firm to bear. This perception has shaped the strategies for firms. The concept of shared value primarily recognizes the needs of the society which define market structure. In the same vein, it put into recognition social harms and weakness which results to its internal cost (Porter and Kramer, 2011). Roots of Shared Value Primarily, there is an interconnection between health of a community around and competitiveness of a firm. A firm requires not only a society to exist but also a very successful one to create market and also to come to terms with terms of service, harms and weakness. For instance, managers have put their strength and efforts on the industry because it has a very decisive impact on the firm’s productivity and improvement. Creation of shared value Shared value can be created by creating societal value: For instance, there are three ways to do this; building supportive industry, redefining productivity and conceiving product and market again. Capitalism boundaries are set by shared values through relating companies’ success and advancement of the society. Preconceiving product and market A society’s needs are diverse ranging from better housing, health, water, improved nutrition and less environmental impact among others. Still they are the most unmet basic needs in an economy. Companies should ask themselves if they are meeting the customer’s needs and if the product dispatched is good. In more developed economies, demand and supply of a product that are fair to society are increasing. Food companies for instance, which were driven initially by taste and quantity, are now concentrating on the fundamentals of food such as nutrition (Porter and Kramer, 2011). Redefining productivity in the value chain Value chain is affected diversely by natural resources: For instance, water use, health, security, equality; working conditions are important aspects in productivity of a business. Energy use There is a re-examination of energy use ranging from transport, buildings, and supply chain and support service triggered by skyrocketing of prices. As a result, there has been energy improvement and utilization by incorporating advanced and efficient methods and technologies, recycling and cogeneration Recourse use Better utilization of recourses has been heightened through awareness campaigns and also through advanced technologies. This has resulted to parts of the value chain spreading to channels and suppliers. For instance, “Coca-Cola has already reduced worldwide water consumption by 9% from 2004” Employee productivity This focuses on reducing wage benefits and holding down wage level is giving way to awareness of positive results. Many companies traditionally lowered the wages of the higher paid employees on the basis of health care coverage. In recent years, many more companies have embraced the fact that employee’s health is vital for companies’ survival. Location Initially, location of a business mattered, but nowadays, logistics have become inexpensive, the world has been reduced to a global village where people can access information at the touch of a button and also markets are global. The nightmare of locating activities in the developing countries of Africa and Asia Minor is also changing (Porter and Kramer, 2011). Evaluation The article has achieved its goal since the message of shared value has been clearly brought out. The central lesson revolves around companies incorporating the society since it justifies the means and success of a given company. The articles’ strength out ways shortcomings since the lessons learnt can be used in day to day activities for instance, preconceiving product in the market before embarking on any business transactions. Conclusion The author states categorically that operating practices and governing policies are some of the shared values that enhance productivity and competition among all the stakeholders. In moving forward in the economic and social ladder, it is very important to consider the community around and put means that are favorable to them since they are the ones who determine the success of any given company. The shared value approach gives an overview that business can reconstruct market and product to redefine returns of production in the value chain and incorporate efficient and clusters at their location. The organizations should look for ways of practically involving the society since most of the societal needs have not been met. The organization should try to curb corruption and enhance equality on the basis of being human and not on the basis of race religion or economic status. References Porter, M. and Kramer, M. R. (2011). Creating Shared Value: How to Reinvent Capitalism and Unleash a Wave of Innovation and Growth. Harvard Business Review, (Jan/Feb), pp. 63-77. Read More