Hank Fu

Section 23
Porter, Michael and Kramer, Mark. (2011) Creating Shared Value: How to Reinvent Capitalism
and Unleash a Wave of Innovation and Growth. Harvard Business Review, (Jan/Feb), 63-77.
This review serves to analyze and examine the central themes and the significance of the
article Creating Shared Value: How to Reinvent Capitalism and Unleash a Wave of Innovation
and Growth. The authors claim that in order to solve the economic, social, and environmental
problems caused by businesses, the companies must create shared value, which involves
creating economic value in a way that also creates value for society by addressing its needs and
challenges (Porter & Kramer, 64). Instead of merely focusing on generating or maximizing
profit, corporations must redefine their purpose focusing on creating shared value as well. When
companies hold the belief that they can only contribute to the communities by maximizing profit,
their decisions and actions would often lead to commoditization, price competition, little true
innovation, slow organic growth, and no clear competitive advantage (Porter & Kramer, 66).
In the article, it is stated that shared value have the potential of driving the next wave of
innovation and productivity growth in the global economy (Porter & Kramer, 64). As shared
value achieves this goal by connecting the success of businesses to the betterment of
communities, it creates opportunities to increase efficiency, establish differentiation, meet new
demands, and enhance markets. The authors mention that there are three ways that corporations
can build shared value opportunities. First, companies should reconceive their products and
services. Second, companies must redefine productivity in their value chain. Third, the
company may promote the forming of clusters in local communities.
While most companies are spending all the time and efforts on the supply of goods and
services in order to meet customers demand, they tend to neglect the fact that these goods may

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Section 23
not be good for the customers. Companies need to identify all the societal needs, benefits,
and harms that are or could be embodied in the firms products (Porter & Kramer, 68). The
authors point out that food companies that used to focus on the taste and the quantity of the
products are now placing more emphasis on improving nutrition in these food products. Also,
IBM and Intel are now devising ways to help utilities harness digital intelligence in order to
economize on power usage (Porter & Kramer, 67). When companies put these thoughts into
consideration, shared value is created as the consideration for benefiting and bettering the lives
of the customers and their surroundings have led to new innovations. As a result, goods and
services that hold societal and environmental benefits would increase the gains of customers and
communities. Furthermore, by reconceiving their goods and services and exploring the societal
needs, companies may discover the potential of new markets.
Another reason for a company to create shared value is because societal issues can often
create economic costs in the firms value chain (Porter & Kramer, 68). With better technology
and effective utilization of natural resources and efficient operating process can benefit the
environment and minimize costs. The author states that many companies are calling for a greater
emphasis on energy efficiency and utilization. The attempts of reducing shipping costs create
shared value in which they cut down the emissions and costs of energy. With the improvements
of technology, companies have also utilized the use of resources. In addition, instead of exerting
heavy bargaining power on the suppliers to limit the prices like they used to, companies are now
helping to strengthen the suppliers productivity and quality by increasing access to inputs,
sharing technology, and providing financing (Porter & Kramer, 70). In this case, shared value is
created as the suppliers efficiency is enhanced and their environmental impact is reduced.

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Lastly, companies are beginning to promote decent salaries and wages, training, safety, and
wellness for workers due to the realization that these factors lead to greater productivity.
The authors also assert that clusters, or geographic concentrations of firms, related
businesses, suppliers, service providers, and logistical infrastructure in a particular field (Porter
& Kramer, 72) have a significant impact on companies innovation and productivity. To create
shared values, the authors suggest companies to form clusters to enhance the productivity while
addressing gaps or failures in the framework conditions surrounding the cluster (Porter &
Kramer, 72). Cluster building may also lead to positive social and economic results because it
secures reliable supplies and provides better motivations for operational productivity and
efficiency. Moreover, clusters allow companies to connect their success to that of the
communities; this is because when more jobs become available in supporting industries, more
companies are cultivated, thereby increasing the demand for additional services.
The article effectively attains its goal of providing facts and information on the
significance of creating shared value within corporations because the authors presented a clear
solution for companies to snap out of their current economic, social, and environmental
downfall. Not only do the authors provide a strong solution to the problem, they also mention
the detail of different procedures and methods that can assist companies in attaining the
objective. The articles biggest strength is that it informs the readers the effectiveness of taking
shared value initiatives. For example, the authors point out that many well-known companies,
such as Google, Intel, Walmart, Johnson & Johnson, and IBM, have realized the importance of
shared value and taken the suggested approach. In short, the article is essential to informing the

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readers how shared value is what can spark the further innovation and improvement of
businesses.