Creating Share Value Company Case Study

Creating Share Value

Weiwei Sun (Vivian)

CID Number: 01021152

Management Group 2

Tutor name: Sophia Butt

Word count:

12/08/2015

Creating shared value (CSV) is a business concept put forward by Michael E. Porter and Mark R. Kramer in 2011 in their article “Creating Shared Value: Redefining Capitalism and the Role of the Corporation in Society” , further illustrating the relationship between companies’ business strategies and corporate social responsibility (CSR). （） It is noticeable that instead of emphasizing corporate social responsibility, creating shared value focuses more on the nature of capitalism and markets and aims to gain both societal and economic achievements. However, there are critics arguing “Porter and Kramer basically tell the old story of economic rationality as the one and only tool of smart management, with faith in innovation and growth, and they celebrate a capitalism that now needs to adjust a little bit.” （）Is companies adopted business strategies in creating shared value increase their revenue and earn more market share?  This essay will argue that, to some extent, CSV does play a crucial role in the development of the modern corporations in the new global economy.  In this essay, the author will give a brief introduction of CSV and use two examples of CSV in different industries to evaluate the social and economic progress generated and then provide her own understanding of CSV.

Creating Shared Value: Nestlé Case Study

“Nestlé basic business principle is that we can only create value for our shareholders if at the same time we create value for society. We have identified areas where, for Nestlé, business and societal value creation can be optimized. […] We call this Creating Shared Value.”

                                             - Paul Bulcke, CEO Nestlé and Peter Brabeck-Letmathe, Chairman Nestlé  

Nestlé, a Swiss multinational food company founded in 1866, has strategically cooperates with local governments, especially in some developing countries on educating and training local farmers with the goals of increasing their income while gaining better quality raw material for its production in the same time since 2006.

For instance, Nestlé has signed a Memorandum of Cooperation with the local government of Pu’er, Yu’nan Province in China and invested in Nescafé Coffee Centre in the region that will include a coffee farming institute and a consumer experience centre' in 2013. In addition, to improve the skills and experience of those local farmers, Nestlé organized a group of experts to provide all kinds of help by living together with local people. Nestlé calls it the strategy of rural development.

It is clear that all participants of Nestlé’s rural development strategy can be benefited from its process. For the local government, this cooperation largely help to solve the problem of labour surplus in their rural areas and created more job opportunities. Up till now, farmers who plant coffee beans in Yun’nan Province has amounted to 123, 00 with the annual yield of 70, 000 to 80,000 ton and their cultivated area has covered 104, 000 hectares.  More importantly, local government’s fiscal revenue has increased greatly and it is the same to local farmers’ household disposable income.  As for Nestlé, ensuring the sustainable and reasonable supply of its raw material is of great importance.  In 2013, Nestlé purchased 10,500 tonnes of coffee, about 20% of this region’s total crop^[1] . The company’s coffee buying programme directly supports the livelihoods of up to 20,000 people.