Chapter 14: Strategy and Society Flashcards
Social entrepreneur definition
An individual or organization that
uses free-market principles and
creates for-profit businesses with
the goal of creating shared value.
Shared value definition
The simultaneous
creation of economic value (for the
business) and social value (for the
larger community).
Economic value definition
The creation
of income, wealth, and other
economic outcomes for
individuals and organizations.
Social value definition
Improvements in
the noneconomic elements of
individuals’ lives and community
well-being.
The notion of shared value means that organizations, and the communities in which they
operate,
can gain both types of value: improvements in both economic and social welfare
Are profits and social welfare a trade off?
Profit and social welfare are not substitutes that managers have to trade off, but complements
that reinforce each other.
Is social value a source of strategic advantage?
Creating social value may increase revenue through increased
customer loyalty, brand equity, and willingness to pay, or it may reduce costs through efficient
supply chains and engaged, productive employees
Other social value organizations include the not-for
profit healthcare sector:
hospitals, nursing homes, hospice care, or other community-based health agencies
Social value organizations also include public and private universities and colleges,
secondary schools, faith-based organizations, many arts and community development
organizations, and museums.
Sustainable stakeholder advantage
The ability of an organization to consistently gather resources from, or provide services to, key stakeholders such as donors, volunteers, students, or clients.
Social-value organizations work to create sustainable
stakeholder advantage
External Analysis and the Value Net
External Analysis and the Value Net
The Value Net diagram (Figure 14.1)
In the center is the organization and around it is Supplier, Competitor, Complementor, and Customer
Value net definition
A model of value creation that describes how an organization interacts with others in its environment to create value. The value net consists of four elements: customers, suppliers, competitors, and complementors
Customers definition
Individuals or groups
that purchase, or receive, the
outputs of the organization.
Suppliers definition
Individuals, groups,
or organizations that provide
important inputs for the
organization.
Competitor
An individual or organization that makes customers value the organization’s output less because it offers its own product or service.
Complementor
An individual or organization that makes customers value the organization’s output more because of its product or service.
The value net helps social-value-focused organizations, for two reasons:
1) First, most of the
stakeholders they interact with play multiple roles
2) treating a stakeholder as a
“single-role player” can lead to poor decision making
Internal Analysis: Resources and Capabilities
Using the value chain to understand how, when, and where social value gets created has
helped hospitals create sustainable stakeholder advantages.
Successful social value organizations build from a strong platform of clear values and
priorities to develop a set of resources and capabilities that result in value creating activities
Perhaps the greatest difference between an economic-value and social-value focused
organization comes in the area of _______
governance.
Alignment between the organization and its multiple stakeholder
audiences proves to be a constant challenge for social-value organizations
Models like
the McKinsey 7 S framework can help strategic managers create and maintain effective alignment,
just as they can for business firms.
Corporate social responsibility (CSR)
Activities of companies designed to further some social objective that lies beyond the direct economic interests of the organization.
Increasingly, members of the larger society want to know that businesses create social, not merely
economic, value. Business leaders have taken two approaches to meet these demands:
1) They have incorporated demands for corporate social responsibility (CSR) into their existing operations
2) They have tried new and innovative solutions to help solve society’s most intractable problems
The term corporate social responsibility refers to:
activities that companies engage in that are
designed to further some social objective and that lie beyond the direct economic interests of
the firm.
CSR is closely connected to the logic of the ____________________ or __________________
stakeholder model of corporate governance
Figure 14.2 shows this pyramid and the four fundamental social responsibilities of business.
Top - Philanthropic Responsibilities
Ethical Responsibilities
Legal Responsibilities
Bottom - Economic Responsibilities
Economic responsibility
Aka bottom of the pyramid
A firm’s obligation to generate
economic profits.
Unless the firm produces profitable
products and becomes a sustainable and ongoing contributor in society, all its other responsibilities
fade away.
Legal responsibility
aka second to bottom
A firm’s obligation to obey the written and
codified laws of the countries in which it operates.
Ethical responsibility
Second to top
A firm’s obligation to abide by the unwritten ethical standards, norms, and values of the communities in which it operates
Philanthropic responsibility
Top of pyramid
A firm’s obligation to contribute
to the enhancement of the
communities in which it operates.
implies that a firm has an obligation to give back in some way and contribute to
strengthening the fabric of its local communities, as well as the larger society.
A firm can fill its philanthropic responsibilities in
many ways, and managers enjoy substantial discretion about how to fulfill those obligations
Philanthropy
Gifts that promote
the good or well-being of others
Firms engage in traditional philanthropy when they make donations of money,
employee time, or products or services to local community organizations
Cash donations
A monetary gift as
one organization transfers money
to a recipient group.
Example: Sponsoring an event
In-kind donation
Philanthropy accomplished as one organization
transfers product, employee time, or other services to a recipient group.
Example: After Hurricane Katrina hit New Orleans and the Gulf Coast, Walmart donated 1,500 truckloads
of relief supplies to affected residents—another type of in-kind donation
Global Reporting Initiative (GRI)
provides firms and stakeholders with an objective way to assess a firm’s social performance
The GRI has developed a set of reporting guidelines firms use to produce an annual report, much like the 10K filing that US firms provide for their shareholders. The GRI standards cover many areas of a firm’s performance, including economic impacts for shareholders, stakeholders, and communities.
The GRI guidelines also cover a firm’s environmental performance along dimensions including energy use, biodiversity protection, and levels of emissions and waste. The social category of the GRI report holds firms accountable for their labor practices, compliance with
human rights standards and goals, contributions to local communities, and the production of safe and responsible products
More than ______ percent of the world’s largest companies regularly
create and publish sustainability reports based on the GRI guidelines.
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Social Entrepreneurship
The use of innovative organizations and business models to create social value.
Social value is created in two ways:
1) first, by reducing social
harms
2) second, by increasing the level of social benefits.
Where do social entrepreneur’s come from?
Social entrepreneurs may come
from any field, including the government, faith-based organizations, large corporations, and even
traditional entrepreneurial ventures
Types of Social Entrepreneurship
There are three ways
1) They attempt to build capacity,
2) they sell products or services,
3) or they drive institutional change
Capacity building
The transfer of skills and abilities from one
organization to another.
entails transferring the ability to effectively
perform tasks from one organization to another
Institutional change
When entrepreneurs strive to change the way people and groups think about problems and they
work to create or change social institutions—from government policies to social values
Most social entrepreneurial ventures that build capacity rely on ______________ and __________ as
a key element of their business model
education and training
Skills of Social Entrepreneurs
The different value creation strategies for social entrepreneurship each require a unique set of
organizational skills and leadership abilities.
Figure 14.3 matches the three types of social
entrepreneurship with its corresponding leadership skill set
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Social bricoleur
Organizations focused on capacity
building need a leader who is a social bricoleur
A social entrepreneur who creates something new through the combination of diverse and
different elements.
one who can successfully bricolage, a
French word that means creating something by combining diverse and different elements, into
a new setting
Social constructor
A social entrepreneur who builds something that did not exist before.
Constructors build something new and
innovative that did not exist before.
Social engineer
Finally, social entrepreneurial organizations working to create larger, institutional
changes succeed when led by a social engineer
A social entrepreneur who designs and creates new social systems to create large-scale change
Engineers design and then create more
effective social systems to create large-scale change.
Challenges in Social Entrepreneurship
First, social entrepreneurs often work in difficult, unstable, and harsh conditions, particularly
those working at the base of the economic pyramid to help the world’s poor
Second, social entrepreneurs who want to combine a for-profit model with a social mission
face the difficulty of managing a hybrid organization
-For example, TOMS is a for-profit shoe and
eyewear retailer whose mission includes providing a pair of shoes to a needy person for every
pair of shoes sold and helping restore a person’s eyesight with every pair of sunglasses purchased
Base of the pyramid (BoP)
Describes those living in conditions of extreme poverty
around the world, usually defined
as those who earn less than $2 per day.
BoP environments usually feature harsh
climates including excessive heat, cold, humidity, or desert conditions
Hybrid organization
An organization pursuing more than a single goal; each goal has equal importance.
