Business Policy Assignment: “Creating Shared Value”
CITIBANK & HSBC
9/26/2013
D Siddhartha Reddy-014
PGDM-Finance
Executive Summary
How to reinvent capitalism and unleash a wave of innovation and growth by Michael Porter and Mark Kramer
Shared Value is a new form of capitalism. The idea of shared value was initially explored by the authors in December 2006 HBR. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. In the article Porter & Kramer criticize neoclassical thinking on the trade-off between societal needs and economic success, and the way the concept of ‘externalities’ have shaped corporate and policy strategy. Article says that corporations
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GE reinforced its R&D to meet this decision of enhancing the products to provide better health to the world around. The business goals of GE are to create 100 new products by 2015, enter new markets and realize revenues. The social goals are to decrease cost by 15 percent, increase access by 15 percent and also increase quality by 15 percent.
There are three main ways companies can create shared value opportunities, all of them are mutually reinforcing
Re-Thinking Products and Markets * Societal needs are the greatest unmet needs in society * When businesses build products around society, then both business and society benefit.
Redefining Productivity in the Value Chain * Productivity and societal progress heavily linked – so called ‘externalities’ usually become internal costs to the firm. * Growing consensus that major improvements in environmental performance can often be achieved with better technology at nominal incremental cost and can even yield net cost savings through enhanced resource utilization, process efficiency, and quality. * Costs must be looked at in a long term perspective, and no longer short term
Enabling Local Cluster Development * Success of every company is affected by the supporting companies and infrastructure around it. Productivity
Analyzing GE’s corporate-level strategy from 2001 – present with Jeff Immelt as CEO, GE focuses on the growth and development platforms. Technology is the key driving force for GE’s future and growth. Advancements in industries such as energy, health and aviation fueled demand for cleaner and more efficient energy production. GE identified new markets with potential high-growth that offered attractive returns through strategic mergers and acquisitions. As CEO, Jeff Immelt established a process for identifying projects that offered attractive growth potential which were then nurtured and treated as special projects or initiatives that were not subject to strict budget constraints. Immelt introduced GE’s three strategic imperatives as: (1) sustaining its strong business model, (2) strengthening the business portfolio, and (3) driving its growth initiatives. www.ge.com
According to study of Hill and Jones (2013), value creation frontier refers to the maximum amount of value that the products of different companies within an industry can provide to customers at any one time using the different business models. To reach the value creation frontier, the company must pursue one or more of the four building blocks of competitive advantage, which are innovation, quality, customer responsiveness and efficiency. The concept provide four basic ways to
Kristof proclaims “increasingly, a company that ignores social values loses shareholder value.” Kristof depicts another beneficial reason to help others with this argument, he reaches the more greedy persona in this
costs. It compares initial investment options and identifies the least cost alternatives for a twenty year period. As applied to
Exhibit 2 describes GM’s linkages with the society across its value chain. There are inside out linkages such as generating employment, developing infrastructure and environmental hazards as well as outside-in linkages such as availability of labor, infrastructure and social and political goodwill
Starting with hardware, the systems that a company chooses to rely on to run its business will have a big influence on how effectively they can scale over time
The productivity and costs affect the economic directions. The Disney Company will be able to increase labor effectiveness and efficiency which in turns leads to higher gains. This leads to an increase in the performance thus the company growth. Also, high productivity leads low inflationary prices hence friendly market to the consumers of electronics and appliances of the Disney Company. The productivity and costs as an economic indicator will help the Disney Company sustain higher growth due to labor efficiency. Hence, the labor productivity growth will
According to Svenskt Naringsliv (2004, p. 4), the main objective of business is to "develop, produce, and supply goods and services to customers." The objective of this, in turn is to make a profit. To do this, a company must have a much deeper understanding of its environment than simply suggested by supply and demand. The company must also have an understanding of the social environment and the values of the area within which it operates. The values the company operates under must then be
Equipment Recycling, Consumable Waste and Energy Conservation are all initiatives that should be considered to improve environmental performance and sustainability.
Analysis - GE has likely been so successful over the years because of its ability to foresee major trends and capitalize upon them. In the 1960s, for instance, GE was one of the eight major computer companies. Even recently, since 1986, GE has continued to acquire several organizations; portions of NBC, wind manufacturing, universe pictures, aerospace industries, international firms, software and hardware manufacturing, even oil companies abroad. The company culture describes itself as not one company, but many each unit a vast and complex enterprise in and of itself, with a corporate
“GE’s commitment to implementing innovative, cost-effective technologies that enhance the customers’ environmental and operating performance.”
More recently it seems that most profit lies in company-wide specialization, and the avant-garde of most industries lies entirely in individual companies working towards their own goals. In fact, recently competition has been avoided amongst very large companies, as it is more profitable to exploit the consumer by limiting their options. When the consumer has few to no options, there is little incentive to invest in the improvement of services. Capitalism can be both a catalyst and a hinderance for improvements, and it would be disingenuous to assume socialism couldn’t at least match capitalism in this regard. For example in socialistic societies, financial sustainability wouldn’t be a concern for freelance or employed thinkers. The idea that capitalism is holistically superior innovatively stems from capitalism’s omnipresence on a global scale. The ex post facto attribution of innovative technology to capitalism is a post hoc ergo propter hoc
GE health care has a global reorganization. IT should be considered as one of the most important key factor for their success. GE health care take record of each and everyone their patients records with the help of the technology that was developed during the years. They use a number of IT function for themselves and their patient’s convenience. Here in the below are listed with some of the evidences to prove that GE is a true technology user.
Inciting Incident: Her father dies and she left to become the scullery maid for her mean step mother and sisters. She dreams of having a better life in which she is loved. The internal motivation here is that Cinderella allows her step-family to make her into a dish rag.
GE Healthcare is a unit of the wider General Electric Company. It has a global orientation, employing more than 46, 000 staff committed to serving healthcare professionals and patients in over 100 countries. It is headquartered in the United Kingdom (UK)-the first GE business segment outside the United States. It has a turnover of approximately $ 17 billion. The headquarters hosts GE healthcare corporate offices as well as finance, sales, global sourcing departments, X-Ray marketing, manufacturing, design and shipping. The finance and sales departments at the headquarters handle GE Healthcare’s high level decisions, but each modality often has its own similar