Question

In: Operations Management

Discuss the differences between economic value, social value, and the shared value creation framework? Under what...

Discuss the differences between economic value, social value, and the shared value creation framework? Under what circumstances would a company choose to focus on the creation of only one type of value over another?  Is it practical to focus on shared value creation, and why would a company and its stakeholders benefit from such a strategy?

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Expert Solution

Economic value is the gain from a product or service to the economic agent. Any business working for growth and development will make it the main goal to gain economic value from what they are delivering. Social value is the improvement in the individuals' lives from the changes in resources and processes. Shared value creation framework is the combination of economic and social value where the economic value is created and social needs are addressed simultaneously. A business can create a shared value framework by working for a profitable business and improving their performance towards the environment, public health, financial security etc of the people working in the organization and being effected from the business in any way.

A company would choose to focus on the creation of only one type of value over another when it has limited resources and working on both of them efficiently cannot be possible for them to grow. In such a situation they have to focus on raising the economic value of the business. An organization which is non-profitable and works as a charitable organization will have to emphasize social value more than the economic value because their goal is to fulfil the societal needs and challenges around them. A company that is growing and has a good amount of resources to create a shared value can focus on both developing a shared value framework.

Focusing on shared value creation should be the goal of every business. Economically benefitting from the business and socially improving through the business is what every business should follow to create sustainable value. Creating shared value is possible by using the inputs, resources and processes to increase the value of these inputs for economic value and developing a cost-saving approach for the society or environment to create social value. Such a strategy can be beneficial to the business as well as the stakeholders because the economic value helps in the growth of business and social value improves the societal and environmental situation. For example, a company can create a product for low-income customers. They will benefit these customers from this product which will improve their social living, the increased sale will increase the revenue and profits, this will increase the market share and benefit the shareholders. And thus the company will be able to create a shared value framework for the business and the society.


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