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The Pub Case questions:? Conduct a macro environmental analysis (PEST

1. The length of the summary for each article should be between 15-30 lines (single-spaced, Times New Roman, 12-point font, 1-inch margins). Please use a space between the paragraphs.

2. Please make sure to separate each article and case by the title of the article or case in bold format.

3.The length of the case answer for each question should be between 10-30 lines (single-spaced, Times New Roman, 12-point font, 1-inch margins). Please note that for some questions you need to draw a table and use bullet points. You need to submit the case questions along with the article summary in one document. You can use outside sources to answer case questions, but make sure to paraphrase and have references in the text and at the end of the document. Please write the original question and use a space between the paragraphs.

Article(1): Porter, M. E. & Kramer, M. R. 2006. Strategy and society: The Link Between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review, 84 (12): 78-92. 

Article(2): Porter, M. 2008. The five competitive forces that shape strategy. Harvard Business Review, 86(1): 78-93.

Case: Case: The Pub

• Case questions: 

1. Conduct a macro environmental analysis (PEST) for The Pub. What are the favorable or unfavorable trends affecting this industry?

2. Identify the industry in which The Pub operates and conduct a Five Forces analysis of the industry. Is this an attractive industry?

PEST and PESTEL analysis: https://www.strategicmanagementinsight.com/tools/pest-pestel-analysis.html

TOWS Matrix: definition, practical example and free template:https://www.toolshero.com/strategy/tows-matrix/

www.hbrreprints.org

HBR S

POTLIGHT

Strategy & Society

The Link Between Competitive Advantage and Corporate Social Responsibility

by Michael E. Porter and Mark R. Kramer

Included with this full-text

Harvard Business Review

article:

The Idea in Brief—the core idea The Idea in Practice—putting the idea to work

1

Article Summary

2

Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility

A list of related materials, with annotations to guide further exploration of the article’s ideas and applications

16

Further Reading

Reprint R0612D

For the exclusive use of S. Wang, 2023.

This document is authorized for use only by Si Yu Wang in BUS 690-Winter 2023 taught by Manely Sharifian, San Francisco State University from Dec 2022 to Jun 2023.

H B R S

P O T L I G H T

Strategy & Society

The Link Between Competitive Advantage and Corporate Social Responsibility

page 1

The Idea in Brief The Idea in Practice

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Many firms’ corporate social responsibility (CSR) efforts are counterproductive, for two reasons: They pit business against so- ciety, when the two are actually interde- pendent. And they pressure companies to think of CSR in generic ways, instead of crafting social initiatives appropriate to their individual strategies.

CSR can be much more than just a cost, constraint, or charitable deed. Approached strategically, it generates opportunity, in- novation, and competitive advantage for corporations—while solving pressing so- cial problems.

How to practice strategic CSR? Porter and Kramer advise pioneering innovations in your offerings and operations that create distinctive value for your company

and

so- ciety. Take Toyota. The company’s early re- sponse to public concern about auto emis- sions gave rise to the hybrid-engine Prius. The Prius has not only significantly reduced pollutants; it’s given Toyota an enviable lead over rivals in hybrid technology.

To practice strategic CSR:

1. Identify points of intersection between your company and society.

In what ways does your organization affect society? For example, do you provide safe working conditions and reasonable wages? Do your operations create envi- ronmental hazards?

How does society affect your competitive- ness? For instance, do countries where you operate protect intellectual property? Sup- ply enough talented workers? Encourage outside investors?

2. Select social issues to address.

Given your company’s and society’s impact on each other, how might you address social needs in ways that create shared value—a meaningful benefit for society that also adds to your com- pany’s bottom line?

Example:

By addressing the AIDS pandemic in Africa, a mining company such as Anglo American would not only improve the standard of liv- ing on that continent; it would also im- prove the productivity of the African labor force on which its success depends.

3. Mount a small number of initiatives that generate large and distinctive benefits for society

and

your company.

Example:

To enter the Indian market, Nestlé needed to establish local sources of milk from a large, diversified base of small farmers. It re- ceived government permission to build a dairy in the district of Moga. But in Moga, farmers were impoverished, failed crops led to a high death rate in calves, and lack of re- frigeration prevented farmers from ship- ping milk or keeping it fresh.

Nestlé built refrigerated dairies as milk col- lection points in each Moga town and sent its trucks to the dairies to collect the milk.

With the trucks went veterinarians, nutri- tionists, agronomists, and quality assurance experts. Farmers learned that milk quality hinged on adequate feed crop irrigation. With financing and technical assistance from Nestlé, farmers dug deep-bore wells. The consequent improved irrigation re- duced calves’ death rate 75%, increased milk production 50-fold, and allowed Nestlé to pay higher prices to farmers than those set by the government.

With steady revenues, farmers could now obtain credit. Moga’s standard of living im- proved: More homes had electricity and telephones; more towns established pri- mary, secondary, and high schools; and Moga had five times the number of doc- tors as neighboring regions. Meanwhile, Nestlé gained a stable supply of high- quality commodities—without having to pay middlemen—and saw demand for its products increase in India.

For the exclusive use of S. Wang, 2023.

This document is authorized for use only by Si Yu Wang in BUS 690-Winter 2023 taught by Manely Sharifian, San Francisco State University from Dec 2022 to Jun 2023.

HBR S

POTLIGHT

Strategy & Society

The Link Between Competitive Advantage and Corporate Social Responsibility

by Michael E. Porter and Mark R. Kramer

harvard business review • december 2006 page 2

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Governments, activists, and the media have become adept at holding companies to ac- count for the social consequences of their ac- tivities. Myriad organizations rank companies on the performance of their corporate social responsibility (CSR), and, despite sometimes questionable methodologies, these rankings attract considerable publicity. As a result, CSR has emerged as an inescapable priority for business leaders in every country.

Many companies have already done much to improve the social and environmental con- sequences of their activities, yet these efforts have not been nearly as productive as they could be—for two reasons. First, they pit busi- ness against society, when clearly the two are interdependent. Second, they pressure compa- nies to think of corporate social responsibility in generic ways instead of in the way most ap- propriate to each firm’s strategy.

The fact is, the prevailing approaches to CSR are so fragmented and so disconnected from business and strategy as to obscure many of the greatest opportunities for companies to benefit

society. If, instead, corporations were to analyze their prospects for social responsibility using the same frameworks that guide their core business choices, they would discover that CSR can be much more than a cost, a constraint, or a chari- table deed—it can be a source of opportunity, innovation, and competitive advantage.

In this article, we propose a new way to look at the relationship between business and soci- ety that does not treat corporate success and social welfare as a zero-sum game. We intro- duce a framework companies can use to iden- tify all of the effects, both positive and negative, they have on society; determine which ones to address; and suggest effective ways to do so. When looked at strategically, corporate social responsibility can become a source of tremen- dous social progress, as the business applies its considerable resources, expertise, and insights to activities that benefit society.

The Emergence of Corporate Social Responsibility

Heightened corporate attention to CSR has

For the exclusive use of S. Wang, 2023.

This document is authorized for use only by Si Yu Wang in BUS 690-Winter 2023 taught by Manely Sharifian, San Francisco State University from Dec 2022 to Jun 2023.

Strategy & Society

HBR S

POTLIGHT

harvard business review • december 2006 page 3

not been entirely voluntary. Many companies awoke to it only after being surprised by pub- lic responses to issues they had not previously thought were part of their business responsi- bilities. Nike, for example, faced an extensive consumer boycott after the

New York Times

and other media outlets reported abusive labor practices at some of its Indonesian suppliers in the early 1990s. Shell Oil’s decision to sink the

Brent Spar,

an obsolete oil rig, in the North Sea led to Greenpeace protests in 1995 and to in- ternational headlines. Pharmaceutical compa- nies discovered that they were expected to re- spond to the AIDS pandemic in Africa even though it was far removed from their primary product lines and markets. Fast-food and pack- aged food companies are now being held re- sponsible for obesity and poor nutrition.

Activist organizations of all kinds, both on the right and the left, have grown much more aggressive and effective in bringing public pres- sure to bear on corporations. Activists may target the most visible or successful companies merely to draw attention to an issue, even if those corporations actually have had little im- pact on the problem at hand. Nestlé, for ex- ample, the world’s largest purveyor of bottled water, has become a major target in the glo- bal debate about access to fresh water, despite the fact that Nestlé’s bottled water sales con- sume just 0.0008% of the world’s fresh water supply. The inefficiency of agricultural irriga- tion, which uses 70% of the world’s supply annually, is a far more pressing issue, but it offers no equally convenient multinational corporation to target.

Debates about CSR have moved all the way into corporate boardrooms. In 2005, 360 dif- ferent CSR-related shareholder resolutions were filed on issues ranging from labor condi- tions to global warming. Government regula- tion increasingly mandates social responsi- bility reporting. Pending legislation in the UK, for example, would require every publicly listed company to disclose ethical, social, and environmental risks in its annual report. These pressures clearly demonstrate the ex- tent to which external stakeholders are seek- ing to hold companies accountable for social issues and highlight the potentially large fi- nancial risks for any firm whose conduct is deemed unacceptable.

While businesses have awakened to these risks, they are much less clear on what to do

about them. In fact, the most common corpo- rate response has been neither strategic nor operational but cosmetic: public relations and media campaigns, the centerpieces of which are often glossy CSR reports that showcase companies’ social and environmental good deeds. Of the 250 largest multinational corpo- rations, 64% published CSR reports in 2005, ei- ther within their annual report or, for most, in separate sustainability reports—supporting a new cottage industry of report writers.

Such publications rarely offer a coherent framework for CSR activities, let alone a strate- gic one. Instead, they aggregate anecdotes about uncoordinated initiatives to demonstrate a com- pany’s social sensitivity. What these reports leave out is often as telling as what they in- clude. Reductions in pollution, waste, carbon emissions, or energy use, for example, may be documented for specific divisions or regions but not for the company as a whole. Philan- thropic initiatives are typically described in terms of dollars or volunteer hours spent but almost never in terms of impact. Forward-looking commitments to reach explicit performance targets are even rarer.

This proliferation of CSR reports has been paralleled by growth in CSR ratings and rank- ings. While rigorous and reliable ratings might constructively influence corporate behavior, the existing cacophony of self-appointed score- keepers does little more than add to the confu- sion. (See the sidebar “The Ratings Game.”)

In an effort to move beyond this confusion, corporate leaders have turned for advice to a growing collection of increasingly sophisti- cated nonprofit organizations, consulting firms, and academic experts. A rich literature on CSR has emerged, though what practical guidance it offers corporate leaders is often unclear. Ex- amining the primary schools of thought about CSR is an essential starting point in under- standing why a new approach is needed to in- tegrating social considerations more effectively into core business operations and strategy.

Four Prevailing Justifications for CSR

Broadly speaking, proponents of CSR have used four arguments to make their case: moral obligation, sustainability, license to operate, and reputation. The moral appeal—arguing that companies have a duty to be good citizens and to “do the right thing”—is prominent in

Michael E. Porter

is the Bishop William Lawrence University Professor at Har- vard University; he is based at Harvard Business School in Boston. He is a fre- quent contributor to HBR, and his most recent article is “Seven Surprises for New CEOs” (October 2004).

Mark R. Kramer

([email protected]) is the managing director of FSG Social Impact Advisors, an international nonprofit con- sulting firm, and a senior fellow in the CSR Initiative at Harvard’s John F. Kennedy School of Government in Cambridge, Massachusetts. Porter and Kramer are the cofounders of both FSG Social Impact Advisors and the Center for Effective Philanthropy, a nonprofit re- search organization.

For the exclusive use of S. Wang, 2023.

This document is authorized for use only by Si Yu Wang in BUS 690-Winter 2023 taught by Manely Sharifian, San Francisco State University from Dec 2022 to Jun 2023.

Strategy & Society

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POTLIGHT

harvard business review • december 2006 page 4

the goal of Business for Social Responsibility, the leading nonprofit CSR business associa- tion in the United States. It asks that its mem- bers “achieve commercial success in ways that honor ethical values and respect people, com- munities, and the natural environment.” Sus- tainability emphasizes environmental and community stewardship. An excellent defini- tion was developed in the 1980s by Norwegian Prime Minister Gro Harlem Brundtland and used by the World Business Council for Sus- tainable Development: “Meeting the needs of the present without compromising the ability of future generations to meet their own needs.” The notion of license to operate de- rives from the fact that every company needs tacit or explicit permission from governments, communities, and numerous other stakehold- ers to do business. Finally, reputation is used by many companies to justify CSR initiatives on the grounds that they will improve a com-

pany’s image, strengthen its brand, enliven morale, and even raise the value of its stock. These justifications have advanced thinking in the field, but none offers sufficient guidance for the difficult choices corporate leaders must make. Consider the practical limitations of each approach.

The CSR field remains strongly imbued with a moral imperative. In some areas, such as hon- esty in filing financial statements and operat- ing within the law, moral considerations are easy to understand and apply. It is the nature of moral obligations to be absolute mandates, however, while most corporate social choices involve balancing competing values, interests, and costs. Google’s recent entry into China, for example, has created an irreconcilable conflict between its U.S. customers’ abhorrence of cen- sorship and the legal constraints imposed by the Chinese government. The moral calculus needed to weigh one social benefit against an- other, or against its financial costs, has yet to be developed. Moral principles do not tell a pharmaceutical company how to allocate its revenues among subsidizing care for the indi- gent today, developing cures for the future, and providing dividends to its investors.

The principle of sustainability appeals to en- lightened self-interest, often invoking the so- called triple bottom line of economic, social, and environmental performance. In other words, companies should operate in ways that secure long-term economic performance by avoiding short-term behavior that is socially detrimental or environmentally wasteful. The principle works best for issues that coincide with a company’s economic or regulatory in- terests. DuPont, for example, has saved over $2 billion from reductions in energy use since 1990. Changes to the materials McDonald’s uses to wrap its food have reduced its solid waste by 30%. These were smart business deci- sions entirely apart from their environmental benefits. In other areas, however, the notion of sustainability can become so vague as to be meaningless. Transparency may be said to be more “sustainable” than corruption. Good em- ployment practices are more “sustainable” than sweatshops. Philanthropy may contribute to the “sustainability” of a society. However true these assertions are, they offer little basis for balancing long-term objectives against the short-term costs they incur. The sustainability school raises questions about these trade-offs

The Ratings Game

Measuring and publicizing social perfor- mance is a potentially powerful way to influence corporate behavior—assuming that the ratings are consistently mea- sured and accurately reflect corporate social impact. Unfortunately, neither condition holds true in the current pro- fusion of CSR checklists.

The criteria used in the rankings vary widely. The Dow Jones Sustainability Index, for example, includes aspects of economic performance in its evalua- tion. It weights customer service al- most 50% more heavily than corporate citizenship. The equally prominent FTSE4Good Index, by contrast, contains no measures of economic performance or customer service at all. Even when criteria happen to be the same, they are invariably weighted differently in the final scoring.

Beyond the choice of criteria and their weightings lies the even more perplexing question of how to judge whether the cri- teria have been met. Most media, non- profits, and investment advisory organi- zations have too few resources to audit a universe of complicated global corporate

activities. As a result, they tend to use measures for which data are readily and inexpensively available, even though they may not be good proxies for the social or environmental effects they are intended to reflect. The Dow Jones Sustainability Index, for example, uses the size of a com- pany’s board as a measure of community involvement, even though size and in- volvement may be entirely unrelated.

1

Finally, even if the measures chosen accurately reflect social impact, the data are frequently unreliable. Most ratings rely on surveys whose response rates are statistically insignificant, as well as on self-reported company data that have not been verified externally. Companies with the most to hide are the least likely to re- spond. The result is a jumble of largely meaningless rankings, allowing almost any company to boast that it meets some measure of social responsibility—and most do.

1. For a fuller discussion of the problem of CSR ratings, see Aaron Chatterji and David Levine, “Breaking Down the Wall of Codes: Evaluating Non-Financial Performance Measurement,”

Cali- fornia Management Review,

Winter 2006.

For the exclusive use of S. Wang, 2023.

This document is authorized for use only by Si Yu Wang in BUS 690-Winter 2023 taught by Manely Sharifian, San Francisco State University from Dec 2022 to Jun 2023.

Strategy & Society

HBR S

POTLIGHT

harvard business review • december 2006 page 5

Mapping Social Opportunities

The interdependence of a company and society can be analyzed with the same tools used to analyze competitive posi- tion and develop strategy. In this way, the firm can focus its particular CSR ac- tivities to best effect. Rather than merely acting on well-intentioned impulses or reacting to outside pressure, the organi- zation can set an affirmative CSR agenda that produces maximum social benefit as well as gains for the business.

These two tools should be used in dif- ferent ways. When a company uses the value chain to chart all the social conse- quences of its activities, it has, in effect, created an inventory of problems and

opportunities—mostly operational issues—that need to be investigated, prioritized, and addressed. In general, companies should attempt to clear away as many negative value-chain social im- pacts as possible. Some company activi- ties will prove to offer opportunities for social and strategic distinction.

In addressing competitive context, companies cannot take on every area in the diamond. Therefore, the task is to identify those areas of social context with the greatest strategic value. A company should carefully choose from this menu one or a few social initia- tives that will have the greatest shared

value: benefit for both society and its own competitiveness.

Looking Inside Out: Mapping the Social Impact of the Value Chain

The

value chain

depicts all the activities a company engages in while doing business. It can be used as a frame- work to identify the positive and nega- tive social impact of those activities. These “inside-out” linkages may range from hiring and layoff policies to greenhouse gas emissions, as the par- tial list of examples illustrated here demonstrates.

Inbound Logistics

(e.g., incoming material

storage, data, collection, service,

customer access)

Operations (e.g.,

assembly, component fabrication,

branch operations)

Outbound Logistics (e.g., order processing,

warehousing, report

preparation)

Marketing & Sales

(e.g., sales force,

promotion, advertising,

proposal writing, Web

site)

After-Sales Service

(e.g., installation, customer support,

complaint resolution, repair)

S up

po rt

A ct

iv it

ie s

Pr im

ar y

A ct

iv it

ie s

Firm Infrastructure (e.g., financing, planning, investor relations)

Human Resource Management (e.g., recruiting, training, compensation system)

Technology Development (e.g., product design, testing, process design, material research, market research)

Procurement (e.g., components, machinery, advertising, & services)

• Relationships with universities

• Ethical research practices (e.g., animal testing, GMOs)

• Product safety

• Conservation of raw materials

• Recycling

• Procurement & supply chain practices (e.g., bribery, child labor, conflict diamonds, pricing to farmers)

• Uses of particular inputs (e.g., animal fur)

• Utilization of natural resources

• Transportation impacts (e.g., emissions, con- gestion, logging roads)

• Emissions & waste

• Biodiversity & ecological impacts

• Energy & water usage

• Worker safety & labor relations

• Hazardous materials

• Packaging use and disposal (McDonald’s clamshell)

• Transportation impacts

• Marketing & advertising (e.g., truthful advertising, advertising to children)

• Pricing practices (e.g., price discrimination among customers, anticompetitive pricing practices, pricing policy to the poor)

• Consumer information

• Privacy

• Financial reporting practices

• Government practices

• Transparency

• Use of lobbying

• Education & job training

• Safe working conditions

• Diversity & discrimination

• Health care & other benefits

• Compensation policies

• Layoff policies

• Disposal of obsolete products

• Handling of consumables (e.g., motor oil, printing ink)

• Customer privacy

Source: Michael E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, 1985

For the exclusive use of S. Wang, 2023.

This document is authorized for use only by Si Yu Wang in BUS 690-Winter 2023 taught by Manely Sharifian, San Francisco Stat

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