Discussion

Discussion Topic:

· Discuss the difference between economic value and social value or the shared value creation framework. Why do you think organizations tend to focus on the creation of one type of value but not both?

· Provide an example

Hello Professor and Peers,

In the context of economic, social, and shared value creation, the term "value" refers to creating something of worth. Social values does not necessarily focus on price of the product or service, but looks at the benefit it has on the communities it serves. They are values set by a firms vision for their future. An example is Caterpillar Inc.'s 2020 goals of reducing energy and water consumption, and focus on lowering recordable workplace injuries (Caterpillar Inc., 2020). Economic value focuses on representing the maximum amount of money someone is willing to pay for a good or service, and relates more to the interest of the firms stakeholders and shareholders. According to Milton Friedman, "there is only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game" (Rothaermel, 2019, p.422). To summarize, economic value focuses primarily on benefiting stockholders and shareholders by gaining and sustaining competitive advantage, and social value focuses more the added benefits to the communities served. The shared value creation framework provides managers guidance on how to bridge economic value with social value, and recognizes that "markets are defined by both" (Rothaermel, 2019, p.422). I think that organizations tend to focus on one type of value rather than both because they seem to have a direct affect on each other. An organization that focuses on social value and reduces pollution and resource consumption, along with lowering workplace accidents can have a large affect on the bottom line.

Caterpillar Inc.. (2020).  Sustainability. https://www.caterpillar.com/en/company/sustainability/vision-mission-strategy.html

Rothaermel, F. T. (2019). Strategic Management (4th ed.). https://newconnect.mheducation.com/.