Business Studies

Respond to the following in a minimum of 175 words:

Discuss the difference between economic value and social value or the shared value creation framework. Why do you think organizations tend to focus on the creation of one type of value but not both?

ANSWER

Social Value and Economic Value

The value of any product or service is based on either its social or economic value. The social value of a product or service is generated when the necessary resources, processes, inputs, and policies are integrated to provide fulfillment to the society (Husted et al., 2015). The fundamental existence of social value in improving the lives of people through prioritizing inclusion and access. Social value does not limit or discriminate against people. Non-profit organizations are the biggest beneficiaries of social value as they value social prosperity over economic or self-gain. The key characteristic of a social value is that it is intrinsic in nature. Examples of society’s activities in which social value is upheld include folk art, animal rights advocacy, community organized activities, among others.

On the other hand, economic value entails the benefits accrued by a service or product to society. Unlike social value, economic value can be measured through the mode of currency used (Husted et al., 2015). Economic value entails assembling the necessary resources, input, and policies to gain profit.

However, organizations tend to prefer one type of value over the other but not both. This narrows down to the culture of the organization. If the organization is out to improve the lives of others, then they would opt to emphasize social value. For organizations that primarily want to make a profit and become successful, their major focus would be prioritizing economic value. Companies cannot embrace different organizational cultures while offering the same products or services; thus, the need to choose one value is paramount.

References

Husted, B. W., Allen, D. B., & Kock, N. (2015). Value creation through social strategy. Business & Society, 54(2), 147-186.