management case study
zachzhang
Week5-MerckStrategySocietyCSR.pptxStrategy & Society: Link between Competitive Advantage & Corporate Strategy
Michael E. Porter & Mark R. Kramer
Professor Kelly Ashihara
Case Study: Merck
Presumption of Conflict
Traditional approaches assume that companies and society are in conflict
Pits business against society
A zero-sum game
This is counterproductive, since the two are interdependent
Companies fail to recognize the importance of CSR in their strategies
CSR vs. Business Performance debate
| Key Questions | Are corporations responsible for consequences and their activities? Are business and society interdependent? Are prevailing approaches to CSR too generic? Is there a way to evaluate the effects companies have on society? Can CSR be more than a cost, constraint or charitable deed? |
The Emergence of Corporate Social Responsibility (CSR)
Increasing attention to CSR from governments, activists, media, and others
Companies held accountable
4 prevailing justifications for CSR:
Moral obligation
Sustainability
License to operate
Reputation
History of CSR
In the past, CSR was treated more as an unavoidable cost
Better if viewed as a potential competitive advantage
Presents a framework
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
4 Justifications for CSR
| Moral Obligation Ex: Honesty in filing financial statements Moral obligations are absolute. No way to balance competing social and economic tradeoffs Moral obligations for example can’t tell companies where to allocate financial resources. |
| Sustainability “Meeting the needs of present without compromising future needs” Ex. McDonald’s packaging Most useful for environmental issues where improvements can yield immediate economic benefits Intangible and undefined long term consequences provide a weak justification for short-term costs. |
| License to Operate “Building goodwill to secure the acquiescence of governments and stakeholders” Cedes control to external players that do not understand corporate strategy and operations. Encourages short term and disjointed responses to the squeakiest wheel of the moment |
| Reputation “Enhancing reputation and brand with customers, investors and employees” Little evidence of sustained competitive advantage or insurance against crisis Emphasizes what is visible and popular rather than the social and business impact. |
Business and Society Interdependence
| Interdependence between Business & Society |
| The competitiveness of companies depends heavily on such things as: Improving skill levels Safe working conditions Sense of equal opportunity Transparent business environment Trusted rule of law |
| The health of society depends on such tings as Companies that can create wealth Productive workers Sustainable and efficient use of natural resources Low levels of pollution and environmental degradation Participation in the economy open to all citizens |
| The difficulty lies in balancing short term costs against long term externalities. |
Social Issues in context of Value Chain
Financial reporting, legal lobbying
Product safety, procurement, logistics
Employee training
Diversity & discrimination
Employment practices
CSR Map
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
Social Issues Approach
Creating a Corporate Social Agenda
