Post on 20-Dec-2015
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Taiz master program Engineering & Management Course Strategic managementStrategic position (ECS adapted)
Lecturer : John L Simonswww.jlsimons.orgj.l.simons@rug.nl
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Learning Outcomes (1)
Identify the components of the governance chain of an organisation
Understand differences in governance structures across the world and the advantages and disadvantages of these
Identify differences in the corporate social responsibility stances taken by organisations and how ethical issues relate to strategic purpose
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How about our ethics ?
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Learning Outcomes (2)
Undertake stakeholder analysis as a means of identifying the influence of different stakeholder groups in terms of their power and interest
Consider appropriate ways to express the strategic purpose of an organisation in terms of statements of values, vision, mission, or objectives
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Exhibit 4.1 Influences on Strategic Purpose
Strategicpurpose
Governancestructure
Socialresponsibility
and ethics
Stakeholderexpectations
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What are Stakeholders?
Stakeholders are those individuals
or groups who depend on an
organisation to fulfil their own goals and on
whom, in turn, the organisation
depends.
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What is Corporate Governance?
Corporate governance is concerned with the structures and
systems of control by which managers are held accountable to those who have a legitimate stake
in an organisation.
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Exhibit 4.2 The Chain of Corporate Governance
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Issues Highlighted by the Governance Chain
To whom are executives responsible?
Who are the shareholders?
What is the role of institutional investors?
What means of scrutiny and control exist?
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Reasons for Imperfect Operation of the Governance Chain
Lack of clarity on end beneficiaries Unequal division of power Different levels of access to inform Self-interest among agents Measures and targets reflect agent self-
interests rather than those of end beneficiaries
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Exhibit 4.3 Benefits and Disadvantages of Governance
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Guidelines for Boards
Operate independently of management (no old boys networking)
Be competent to scrutinize the activities of management
Have time to do job properly Behave appropriately given expectations
for trust, role fluidity, collective responsibility, and performance
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Ownership Choices
Private or public ownership of equity
Sale of all or part
Acquisition
Mutual ownership and partnership
Privatisation
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What is Corporate Social Responsibility?
Corporate social responsibility (CSR) is concerned with the ways in which an organisation exceeds
its minimum obligations to stakeholders specified through
regulation.
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Stances on Social Responsibility
Laissez-faireEnlightened self-interest
Forum for stakeholderinteraction
Shaper of society
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BP and The Gulf Disaster
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Exhibit 4.6 TI’s Approach to Ethics
Is the action legal?Does it comply
with values?
Will you feel bad?How would it
look in newspaper?
Do you know it is wrong?
Are you sure?
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Exhibit 4.7 Stakeholders of a Large Organisation
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What is Stakeholder Mapping?
Stakeholder mapping identifies stakeholder expectations
and power and helps in understanding political priorities.
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Exhibit 4.9 The Power/Interest Matrix
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Questions Addressed with Stakeholder Mapping
In determining purpose and strategy, which stakeholder expectations need to be most considered?
Do the actual levels of interest and power reflect the corporate governance framework?
Who are the key blockers and facilitators of strategy?
Is it desirable to reposition certain stakeholders? Can level of interest or power of key stakeholders
be maintained?
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What is Power?
Power is the ability of individuals or groups to persuade, induce, or
coerce others into following certain courses of action.
Different from management ???
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Sources of Power Within Organisations
HierarchyInfluence
Control of strategic
resourcesKnowledgepossession
Control of human
resources
Involvement
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Sources of Power For External Stakeholders
Control of strategic
resources
Knowledgepossession
Informal linksto internal
power
Involvement
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Indicators of Power For Within Organisations
Status
Symbols
Representation
Resourceclaims
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Indicators of Power For External Stakeholders
Status
Symbols
Negotiatingarrangements
Resourcedependence
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Organisational Purposes
Values Mission statement Vision statement Objectives
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What are Core Values?
Core values are the underlying principles that guide an organisation’s strategy.
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What are Mission and Vision Statements?
A mission statement provides employees and stakeholders with clarity
about the overall purpose of the organisation.
A vision statement is concerned with what the organisation
aspires to be.
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Mission and Vison in practice
Find on the net the mission and vision of A yemeni firm A US or UK firm A multinational
Do they underline this difference in mission and vision ?
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What are Objectives?
Objectives are statements of specific outcomes
that are to be achieved.
Objectives must be measurable. Compare with course objectives !!!
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Chapter Summary (1)
The purpose of an organisation will be influenced by expectations of shareholders
Governance chains reveal the links between ultimate beneficiaries and management
The shareholder model and the stakeholder model are the two generic governance systems
Stakeholder analysis reveals the influence of different stakeholders
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Chapter Summary (2)
Ethical dimensions of organisational purpose are expressed via organisational approach to corporate social responsibility as well as by individual resolution of ethical dilemmas
Managers must decide how the organisation should express its strategic purpose through values, vision, mission, and objectives
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Case Example: Product Red and Gap (1)
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Case Example: Product Red and Gap (2)
(Red) was created by Bono and Bobby Shriver, Chairman of DATA, to raise awareness and money for The Global Fund.
It seeks to do so by teaming up with the world’s most iconic brands to produce Red-branded products, a percentage of which is then given to the Fund.
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Case Example: Product Red and Gap (3)
Gap is a brand participant. It seeks to provide responsible sourcing of its products, some of which are produced in Red beneficiary areas.
In contrast, an article in The Times criticised the promotion of shopping as a response to societal issues, further asking whether this was a good use of shareholder funding.
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Case Example: Product Red and Gap (4)
What is the rationale of the founders of Product Red?
What views might shareholders of Gap have of Product Red?
Is Product Red an appropriate corporate activity?
Apply a stakeholder analysis to assess how you could convince management of another company to join this initiative.