Pham Thi Huyen PGDM Marketing Companies are SIEMENS and HONEYWELL 1.

Executive Summary CREATING SHARED VALUE

Roll number: 061

The reading starts with the capitalist system terminology which is under siege. Nowadays, every business faces problem about social responsibility. Companies already took social issues into account but the problem still remains the same as they still narrow their view about value creation. There are required an innovation way of looking into problems to ease trade-offs between economic efficiency and social progress, or we can say that trade on and bring business and society back together. How to solve this problem? The author suggested that the solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. Efforts create shared value was applied by companies such as GE, Google, IBM, Intel, so on but yet our recognition of the transformative power of shared value is still in its genesis. The next concept is externalities such as taxes, regulations and penalties which arise when firms create social costs that they do not have to bear. This perspective has also shaped the strategies of firm to exclude social and environmental consideration from economic thinking. The concept of shared value recognizes that societal needs, not only conventional economic needs, define markets but also social harms or weaknesses frequently create internal costs of firms such as wasted energy or raw materials, costly accidents, and the need for remedial training to compensate for inadequacies in education. Shared value is about expanding the total proof of economic and social value. The meaning of shared value is that creating benefit for all parties or a successful business is not only create demand for its product but also provide critical public assets and a supportive environment, fill up need from social community such as providing jobs and wealth creation opportunities for its citizens. The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while

simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress. Strategy theory holds that to be successful, a company must create a distinctive value proposition that meets the needs of a chosen set of customers. There are three ways to help company can create economic value and societal value: First way is about reconceiving products and markets. The author mentioned about there are always huge demand in society such as health, better housing, improved nutrition, help for the aging, greater financial security, less environment damage. This thought opened up for many companies chance to improve their products and services, therefore shared value is created. Societys gains are greater and businesses are far more effective than governments and non profits. The concept of shared value blurs the line between for profit and nonprofit organizations. This is strong sigs that creating shared value is possible. The concept makes companies pay attention to emerging market such as China, India. The opportunities also await in nontraditional communities in advanced countries such as poor urban areas. Second is redefining productivity in value chain. As author defined the issues from value chain to society are natural resource and water use, health and safety, working conditions, and equal treatment in the workplace. Opportunities to create shared value arise because societal problems can create economic costs in the firms value chain. Companies such as Wal-Mart saved $200 million in costs by reducing its packaging. The synergy increase when firms approach societal issues from a shared value perspective and invent new ways of operating to address them. The following are some of the most important ways in which shared value thinking is transforming the value chain: Energy use and logistics so that the firm can reduce energy use by improve efficiency in logistics; Resource use will be reduced in the way firm heightened environmental awareness and advances in technology; Improving procurement system so that their environmental impact will be falls and shared value is created. Designing a distribution network so that reduce waste and create share value for society, for example, is HUL; Increasing employee productivity by investing in employee wellness programs. Moving production to locations with the lowest labor costs and designing their supply chains to achieve the most immediate impact on expenses will create shared value. Then the author mentioned about enabling local cluster development as productivity and innovation are strongly influenced by cluster, or geographic concentrations of firms, related businesses, suppliers, service providers, and logistical infrastructure in particular field. Firms create shared value by

building clusters to improve company productivity while addressing gaps or failures in the framework conditions surrounding the cluster. A key of cluster building in developing and developed countries alike is the formation of open and transparent markets. And a firm built clusters in its key locations. The benefits of cluster building apply not only in emerging economies but also in advanced countries. Creating shared value will be more effective and fare more sustainable than the majority of todays corporate efforts in the social arena. The opportunities to create shared value are widespread and growing. The principles of shared value not only apply for every major company decision but also apply equally to government and nonprofit organization. Creating shared value will require concrete and tailored metrics for each business unit in each of the three areas. Shared value creation will involve new and heightened form of collaboration. The company will not succeed if they work far away from society benefits. Finally, the author mentioned about the next evolution in capitalism. Shared value focuses companies on the right kind of profits profits that create societal benefits rather than diminish them. Capital markets will undoubtedly continue to pressure companies to generate short-term profits but it will miss greater opportunities. There are need a more sophisticated form of capitalism one imbued with a social purpose. Creating shared value represents a new approach to managing that cuts across disciplines. That will require efforts more beyond todays CSR approaches. Shared value creates the opportunities for corporations to utilize their skills, resources and management capacity and solving societal problems as well. In the reading strategy and society the author mentioned about CSR and how strategy the firm implement CSR for their organization. In the reading Creating shared value the author mentioned more about CSV a new concept and look in different way of CSR. CSR focus mostly on reputation and have only a limited connection to the business making them hard to justify and maintain over the long run. In contrast, CSV is integral to a companys profitability and competitive position. It leverages the unique resources and expertise of the company creates economic value by creating social value.

2. Analysis of how each of the companies in your pair creates SHARED VALUE Siemens According Siemens company presentation, they mentioned about how the world is changing? They pointed out four main things are climate change, urbanization, demographic change and globalization. These lead to questions the company want to focus on their future strategy: 1st: How can we ensure healthcare that is both excellent and affordable? The question leads to deal with demographic change 2nd: How can cities grow and at the same time offer a high quality of life? The question leads the company to solve problem of urbanization. 3rd: How can we make industrial production more flexible, efficient and competitive? The question leads company to build strategy more competitive in globalization. 4th: How can we create economic growth and reduce the consumption of energy and resources at the same time? The question deals with problems which is caused by changing climate or environment. Those four issues are actually contemporary of society issues. Siemens defined those problems and took it into account of strategy. The strategy the company is implementing is called Siemens One. As my opinion, this is the way company change in their strategy for creating share value. Siemens is unrelated business Diversification Corporation. Siemens One intensively leverage growth opportunities in the field of vertical IT and software, constantly enlarge our Environmental Portfolio, strengthen our position in the booming markets of the emerging countries and continuously expand our service business. Vision of company is the pioneer in energy efficiency, industrial productivity, affordable and personalized healthcare, ingredient infrastructure. Those will lead the company to reduce operation cost. Internal communication is an essential ingredient of any eorts to embed shared value creation in a company. Siemens created an internal stakeholder engagement position especially for this purpose.

Finally, one of important Siemens Shared Services model that created value added expertise for company. Siemens Shared Services provides services that add value primarily to Siemens many operating companies through economies of scale, centers of expertise, and best practices. Shared Services business units fall into one of four major clusters: accounting & finance, information technology, human resources, and procurement & logistics. Shared Services mission is to improve the way Siemens does business through a shared services framework that adds recognized value. In order to comply with its mission, Shared Services has developed a partner relationship with its customers, known as the Power of Partners initiative. The ultimate goal is to create value for Siemens by: Partnering with each operating company to drive toward world- class performance. Enabling each company to focus on its core business. Driving costs down while improving quality. Leveraging the sheer size of Siemens by utilizing centers of expertise and centers of scale.

Honeywell Honeywell is diversified companies into related business. The companys strategy concentrates on increasing operational efficiency and cut costs. As Honeywell behaviors are defined by corporate strategy are growth and customer focus, leadership impact, get results, make people better, champions change and Six Sigma, Foster teamwork and diversity, Global mindset, Intelligent risk taking, Self - Aware/Learner, Effective communicator, Integrative thinker, and functional excellence. In Honeywell, each business strategic plan always supported by supply chain management, Information Technology, Engineering and Technology, Six Sigma, HR. These are an initiative to drive more top-line growth and more cost effectiveness out of the engineering development organization. Each business challenged to deliver more innovation, more successful products and services with fewer resources. Honeywell creates green technology and lead all their R&D activities go forward with this. Green technology is the way company reflected their attention to shared value creation toward one of most critical factor in society issues. In terms of, managing resource the company indicated that nearly 50 percent of its portfolio is dedicated to energy efficient products and services. From programmable thermostats and energy management systems to turbochargers and

green fuels to industrial controls and lighter aircraft components, our technologies are building a world that is safer and more secure, more comfortable and energy efficient, and more innovative and productive. In fact, the use of Honeywell technologies could reduce energy demand in the United States and Europe by 20 to 25 percent if they were immediately and comprehensively adopted across the residential, commercial, industrial, and transportation sectors. 3. Recommendations on how each of these 2 companies could sustain it & further enhance their shared value creation. Shared value creation is new way of looking opportunities by improving your businesses model to solve business issues and society issues simultaneously. According to my opinion, Siemens has done shared value creation is better than Honey because Siemens looked at the core problems of contemporary society issues such as climate change, urbanization, demographic change and globalization. However, Honeywell look at energy sufficiency and green technology, it seems to be limited in the way Honeywell doing in terms of shared value creation. As both companies is global company. They almost presented across the world, therefore globalization impacts directly to the corporate strategy. Each company should look at emerging market as new opportunities for their businesses. This is not the way as you do CSR but create shared value all stake holders. Siemens looked at rightly problem of developed countries where market gets saturated and create solution for those problems. However, these changes is not completely defining the issues in emerging countries such as India and Africa. There are more issues about religious, society problems, Thus, we should look at those problems completely and have one strategy for those operations that has to be efficiency model to create share value. We can take example of HUL where they create Shakti model for woman in rural areas. This is one of way implement CSV. As said earlier, Honeywell has limited way of looking problems if compare with Siemens. Developing technology toward green environment is one of key for CSV but not at all. As business model of company is business to business, it may need one integrated business model with its partnership and customers where all parties can share their ideas and implement CSV.