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A Competitive Strategy Can Be Socially Responsible

As your company develops a competitive strategy, you identify the action plans you need to implement it, so you can differentiate the company’s services in the marketplace and create a competitive advantage. Since the benefit of one action may conflict with the benefit of

another, developing and following a specific strategy will allow you to stay on track, consequently generating the greatest value for your business. When you develop the decision-making processes, there will ethical implications, which you will need to be address, understanding there are financial implications to the company, but knowing you have a social responsibility to other stakeholders and society.

To design a competitive strategy, the company should conduct an analysis of internal forces and external forces, which could have an impact on its operations. The internal analysis looks at the company’s strengths and weaknesses, so you can see if the company has the necessary capability and resources to successfully execute the competitive strategy. As you conduct this analysis, the company’s policies on financing, collections, labor rates, workplace conditions, benefits, and employment practices, just to list a few, can have a direct cause and effect on the company being able to execute the strategy. During this design stage, you also need to complete an external analysis to understand the threats and potential opportunities that are present in the marketplace, which could affect the company’s ability to properly execute the plan. Part of the external analysis is understanding the concerns of the company’s external stakeholders, i.e. vendors, customers and the community. Some of their concerns could be health care, resource management, energy conservation and/or sustainability, gender equality, racism, poverty, climate change and pollution, could be a threat to the company, which would need to be addressed, but also some of them could be a hidden opportunity. While you address these concerns, you may realize they provide a benefit and could provide the company a competitive advantage within the market. So, while you develop the competitive strategy, corporate responsibility could become part of the decision-making process, therefore creating additional value for the company.

As background, you need to understand Milton Friedman’s economic theory from the 1970. He suggested, by utilizing all available resources, a company’s profit and consequently its value creation was its only responsibility. Friedman believed that the cost of corporate responsibility would hinder profit so it could only be considered if profits increased or the cost was passed on to the customer through increased prices. Even if the marketplace were willing to pay increased prices, it would not increase company value unless all companies in the marketplace, through laws or regulations, were required to participate in the event or behavior. As the competitive marketplace, along with stakeholders and their concerns, has grown globally over the last 40 years, simply using resources to drive profits and value, without addressing stakeholder concerns is no longer a valid business model.

So as you develop your company's competitive strategy you need to recognize and understand your stakeholders and their issues, which could impact the company. This stakeholder synthesis will either be strategic, which by following the Friedman theory means profits and value creation would be generated at the expense of ethical behavior, or multi-fiduciary, in which ethical behavior and the needs and concerns of the organization’s stakeholders would be met at the expense of profits and value. The “zero sum game” that is created between profits and corporate social responsibility would be counterproductive because their respective outcomes are completely different. So when you design the stakeholder management framework of the company’s competitive strategy, this paradox must be addressed. When you do this, you move your company beyond the theory of Friedman and take a deeper dive in using corporate social responsibility to address the needs and concerns of your stakeholders and society.

If you realize your company does not reside on an island and you and the company are stakeholders of other organizations, as part of a global economy, you can better understand the issues and embrace corporate social responsibility. So if the paradox is addressed, the company can then differentiate its services and products and create a competitive advantage within the marketplace, creating profits and long term value. Consequently, corporate social responsibility and its stakeholder development does not have to be “zero-sum game”, but can be a win-win for the company and its stakeholders.

Developing a competitive strategy can seem overwhelming and time consuming, but is an important step. To help you start the process and answer any questions, so you can understand the process and begin your Pathway to Success, schedule a free strategy session with me!

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