Post on 19-Jan-2016
Slide 4.1Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Exploring Corporate Strategy7th Edition
Part II
The Strategic
Position
Slide 4.2Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Chapter 4
Expectations and Purposes
Exploring Corporate Strategy7th Edition
Slide 4.3Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Expectations and Purposes - Outline
• Corporate governance
• Organisational stakeholders
• Stakeholder mapping
• Ethical issues
• Culture
• Cultural web
• Communication of organisational purposes
Slide 4.4Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
• Complex role that people play in strategy development
• Strategy is about
– what people expect an organisation to achieve
– what influence people can have over an organisation’s purposes
Role of People
Slide 4.5Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Expectations and Purposes
Exhibit 4.1
Slide 4.6Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Corporate Governance
The governance framework– whom the organisation serves– how the purposes and priorities should be decided– how an organisation should function– how power is distributed among stakeholders
Slide 4.7Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
The Chain of Corporate Governance
Exhibit 4.2
Source: Adapted from David Pitt-Watson, Hermes.
Slide 4.8Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
The Chain of Corporate Governance
• Chain or hierarchy of control– Separation of ownership and management
control– Beneficiaries, trustees of funds, investment
managers, board, executive directors, senior executives, managers
• Accountability and responsiveness– Wider range of stakeholders
• Principal-agent relationships
Slide 4.9Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Governance Chain - Issues
• Conflicts of interest
• Directors’ responsibilities to shareholders
• Accountability to stakeholders
• Structure of targets, budgets and rewards
Slide 4.10Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Corporate Governance Reforms (1)• Imperfections in governance chain
– Unequal division of power– Differing access to information
• High profile cases of fraud or poor governance
• Committees established for reform– Risk management– EU
Slide 4.11Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Corporate Governance Reforms (2)
• Real requirements:– Changes in board behaviour– Strategic approach
Slide 4.12Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Role of Governing Bodies
• Different ownership structures– Anglo-Saxon, Rhine, Latin, Japanese models
• Important for international strategy– Does governance help or hinder investment?– Does governance affect speed of investment?– Which relationships are critical?– How quickly will pay-offs be expected?
Slide 4.13Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Strengths and Weaknesses of Governance Systems
Exhibit 4.3a
Source: Adapted from T. Clarke and S. Clegg, Changing Paradigms: The transformation of management knowledge for the 21 century, HarperCollins Business, 2000, Table 6.5, p. 324.st
Slide 4.14Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Strengths and Weaknesses of Governance Systems
Exhibit 4.3b
Source: Adapted from T. Clarke and S. Clegg, Changing Paradigms: The transformation of management knowledge for the 21 century, HarperCollins Business, 2000, Table 6.5, p. 324.
Slide 4.15Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Governing Bodies’ Influence on Strategy (1)
• Two choices– Strategic management delegated to
management– Board engages with management in strategic
management
• High profile company failures focused attention on role of board
Slide 4.16Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Governing Bodies’ Influence on Strategy (2)
• Implications of board involvement– Need to operate independently of management– Must be competent to scrutinise managers’
activities– Need time to do job properly– Importance of softer issues, e.g. trust, respect
Slide 4.17Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Forms of Ownership (1)
• Ownership has fundamental effect on organisational purpose and strategies– Private/public ownership of equity
• Public equity often required for growth
– Sale of all or part of the company• To a more suitable corporate parent
– Target for acquisitions• Compare offer with expected future returns
Slide 4.18Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Forms of Ownership (2)
• Ownership has fundamental effect on organisational purpose and strategies– Mutual ownership
• Customers are owners rather than shareholders
– Privatisation • Market forces, customer needs, access to capital
Slide 4.19Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Stakeholder Expectations
• Corporate governance chain– Formal requirements and boundaries within
which strategy is developed
• Organisational stakeholders– Other groups (internal and external) which
have expectations and potential influence
Stakeholders are those individuals or groups whodepend on the organisation to fulfil their own goalsand on whom the organisation depends
Stakeholders are those individuals or groups whodepend on the organisation to fulfil their own goalsand on whom the organisation depends
Slide 4.20Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
External Stakeholders
Stake-holders
Examples Influence
Market Suppliers, competitors, distributors, shareholders
Economic/value creation
Social/political
Policy makers, regulators, government agencies
Social legitimacy
Techno-
logical
Key adopters, standards agencies, owners of competitive technologies
Diffusion of new technology/
adoption of industry standards
Slide 4.21Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Some common conflicts of expectations
Exhibit 4.4
Slide 4.22Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Conflict of Expectations
• Short-term profitability versus growth• Family control versus professional managers• Financial independence versus share/loan funding• Public share ownership demands openness and
accountability• Cost efficiency may mean job losses• Mass markets may compromise quality• Mass public service provision versus specialist
services• Multinational division loyalty versus host country
loyaltyAdapted from Exh. 4.4
Slide 4.23Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Stakeholder Mapping: the Power/Interest Matrix
Exhibit 4.5
Source: Adapted from A. Mendelow, Proceedings of the Second International Conference on Information Systems, Cambridge, MA, 1991.
Slide 4.24Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Use of Stakeholder Mapping
• Do actual levels of interest and power reflect corporate governance framework?
• Who are key blockers and facilitators of a strategy?
• Is repositioning of stakeholders desirable/feasible?
• Which are the key stakeholders whose interest and power must be maintained to support the strategy?
Slide 4.25Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Sources and indicators of power
Exhibit 4.6
Slide 4.26Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Sources of PowerWithin organisations External stakeholders
Hierarchy (formal power) Control of strategic resources
Influence (informal power) Involvement in strategy implementation
Control of strategic resources Possession of knowledge (skills)
Possession of knowledge and skills
Through internal links
Control of the environment
Involvement in strategy implementation
Adapted from Exh. 4.6
Slide 4.27Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Indicators of Power
Within organisations External stakeholders
Status Status
Claim on resources Resource dependence
Representation Negotiating arrangements
Symbols Symbols
Adapted from Exh. 4.6
Slide 4.28Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Business ethics – the societal expectations of organisations (1)
• Macro level– Range from laissez faire to shapers of society– Ethical stance of organisation in society– Extent an organisation exceeds its minimum
obligations to stakeholders and society
• Corporate social responsibility– Specific ways to exceed minimum obligations
imposed by legislation/corporate governance– Reconcile conflicting demands of stakeholders
Slide 4.29Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Business ethics – the societal expectations of organisations (2)
• Individual level– Behaviour and actions of individuals within
organisations
Slide 4.30Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Four Possible Ethical Stances
Exhibit 4.7
Slide 4.31Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Some questions of corporate social responsibility
Exhibit 4.8a
Slide 4.32Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Some questions of corporate social responsibility
Exhibit 4.8b
Slide 4.33Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Corporate Social Responsibility
Internal Aspects External Aspects
Employee welfare Environmental issues
Working conditions Products
Job design Markets and marketing
Intellectual property Suppliers
Employment
Community activity
Human rights
Adapted from Exh. 4.8
Slide 4.34Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Organisational Culture
“The basic assumptions and beliefs that areshared by members of an organisation, thatoperate unconsciously and define in a basictaken-for-granted fashion an organisation’sview of itself and its environment”
Schein 1997
“The basic assumptions and beliefs that areshared by members of an organisation, thatoperate unconsciously and define in a basictaken-for-granted fashion an organisation’sview of itself and its environment”
Schein 1997
Slide 4.35Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Cultural Frames of Reference
Exhibit 4.9
Slide 4.36Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Organisational Field (1)• Organisations within a field have:
– Common business environment– Common norms and values– Shared set of assumptions
• A recipe of organisational purpose and shared wisdom
• Dangers:– Institutionalised managers – blinkered– Transition between sectors difficult
Slide 4.37Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Organisational Field (2)• Legitimacy:
– Need to meet expectations in terms of assumptions, behaviours and strategies
Slide 4.38Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Organisational Culture
Exhibit 4.10
Slide 4.39Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
The Cultural Web
Exhibit 4.11
Slide 4.40Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Communicating Organisational Purposes
• Corporate Values– Core values, the principles guiding actions
• Vision/Mission– Statement of overriding direction and purpose of
organisation
• Objectives– Statement of specific outcomes to be achieved
• Financial, market-based• Sometimes measurable• Relevant
Slide 4.41Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Key Points (1)• Expectations and purposes influenced by:
– Corporate governance, stakeholder expectations, business ethics and culture
• Corporate governance– Whom organisation serves, how
purposes/priorities decided• Stakeholders’ power and influence
– Stakeholder mapping• Ethical stance
– Corporate social responsibility
Slide 4.42Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Key Points (2)
• Culture – Levels of cultural frames of reference– Layers of values, beliefs, behaviours and taken-
for-granted assumptions– Cultural web
• Communication of organisational purposes– Values, mission, objectives
Slide 4.43Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
The Cultural Web: some useful questions
Exhibit 4.12
Slide 4.44Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
The business idea at Kindercare
Exhibit II.iiSource: Prepared by Michel Bougon, Bryant College, Smithfield, USA.