Septer 13, 1970  Milton Friedman writes in The New York Times Magazine the influential article The Social Responsibility of Business is to Increase its Profits. In this article, Friedman explains the traditional orthodox approach in economics to the firm’s social responsability. This view has been debated ever since.

We cannot ignore that business has a wide influence and impact on our society and environment, the pure profits view somehow limits our analysis. Recents are the cases of Nike’s exploitation of workers in economically struggling countries, BP ecological stance and the backslash caused by oil spillages and Wal-Mart problems with its reputation. It is clear that a corporation must care about the society and the environment in which it operates. Of course, this does not contraddict Friedman’ s great article. The corporation has to protect its reputation and make sure to take all the measures to increase its profits.  This includes being socially responsible and improve the environment if the management believes it will increase the company profits.

Other references:

• Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility, Michael E. Porter and Mark R. Kramer
• Business and Its Environment, David P. Baron

People in the software and technology business are familiar with the concept of platform and software platform. However, a platform does not necessary need to be a software or hardware plaform think of the credit card industry.

David Evans and Richard Schmalensee have written the Catalyst Code: The Strategies Behind the World’s Most Dynamic Companies to explain what drives the success of a catalyst and how different strategies may lead to a success or a failure.

Essentially, a catalyst helps different parties (that need each other) get together, it facilitates the search and reduces the transaction costs. Think of, for example, of Google advertising model which brings together advertisers and users through the search engine. Users use the search engine for free, but the advertisers pay to display ads to the right consumers.

The same authors of the Catalyst Code together with Andrei Hagiu have written Invisible Engines: How Software Platforms Drive Innovation and Transform Industries.

If you are interested in strategic management, check the latest book of Manuel Becerra Theory of the Firm for Strategic Management: Economic Value Analysis. I have had Manuel Becerra as professor of Strategic Management at IE Business school and he is a great professor.

From the back cover: 

Strategic decisions deal with the long-term direction of the firm and its main activities, usually the responsibility of the top managers in an organization. Because the firm is the critical unit of analysis in strategy, we need to define what firms are, how they create value, and what their organizational boundaries are in order to understand their overall performance. However, this must be done in a manner that is most useful for strategic analysis and decision making. In other words, we need a theory of the firm for business strategy. Theory of the Firm for Strategic Management integrates and expands key existing theories, like transaction costs economics and the resource-based view, to develop a value-based theory of the firm. This provides a framework to show how firms can create value for customers and, at the same time, capture economic profits for their owners through business, corporate, international, and social strategies.