SCHULICH SCHOOL OF BUSINESSYORK UNIVERSITY

MGMT 5260

MANAGING FOR VALUE CREATION

Winter 2011Section X

Instructor: Theodore Tolias

Course Directors: Andy Crane and Burkard Eberlein

Time: Wednesday 19:00 – 22:00Location: SSB E111Course Secretary: JoAnne Stein, N305B, jstein@schulich.yorku.ca,

416-767-2100 x55087

Professor: Theodore ToliasOffice: SSB N205FTelephone: (416) 736-2100 x66408E-mail: ttolias@schulich.yorku.caOffice Hours: By appointment

All prerequisites (all 5100 courses) required or instructor permission.

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COURSE DESCRIPTION

This course focuses on understanding and managing value creation. Creating value is a core purpose of any organization, whatever industry or sector it may be in. It is also a key driver of social welfare and economic growth in our societies. Managers therefore need to know how value is created, who it is valuable to, how value gets to be captured, and how value can be destroyed or captured by others.

More specifically, we seek to explore the management of value creation in an environment of multiple stakeholders. That is: (i) value creation is seen as a process involving multiple stakeholders with different aims, values and resources; and (ii) it has significance both at the organizational level (i.e. how can we as managers create and capture value?), and at the societal level (i.e. how should value be created and distributed for the benefit of all?).

Finally, the course offers an integrative approach to management for value creation, highlighting the diversity of value propositions and of actors involved, and bringing a strategic management approach to the new ‘triple-bottom-line’ environment of business.

First, we will introduce ideas and frameworks that address the process of value-creation in a complex environment: we will explore questions such as what is value, how is value created, what and who drives values toward which ends?

Second, we locate the business enterprise (or other organizations such as not-for-profits) at the heart of the value creation process and explore links among the actors it interacts with to create value: shareholders, governments, NGOs, consumers and employees. Some of these actors such as NGOs and governments create value in their own right, but all affect value creation in a business setting. For each of these actors we ask the following questions: what is their (value) purpose and contribution to value creation, their resource base, and their impact on the firm and on the broader environment?

Third, we ask the question: how does business relate to this multiple stakeholder environment? We introduce different modes of interaction and governance, and we address the dynamics of collaboration, competition, and conflict in the value creation process, with a particular focus on negotiation as primary mode of engaging with stakeholders.

Case discussions, a negotiation exercise and an on-line simulation designed to enhance experiential learning and practice strategic decision-making will be used to examine value creation from the perspective of each actor, and then integrate analyses and concepts across these perspectives.

By the end of this course, your skills should be enhanced in the following three areas:

1. Stakeholder Context Analysis: the ability to identify and analyze multiple stakeholders and constituents and how they relate to and interact with the business enterprise

2. Leadership in a Multiple Stakeholder Environment: the ability to engage and negotiate with various stakeholders in a multi-actor process of value creation

3. Strategic Drive to Action - Creating Value: the ability to understand and enact different avenues of value creation in a multi-actor context.

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COURSE MATERIALS

There is no required textbook. Required readings will be available a) through the York University Library web site (go to “Reserves”, type in the course code, 14 items for this course are listed) and b) the course kit that is available for purchase at the bookstore. Additional material such as cases and further readings may be provided in class or through the course materials database (CMD).

Students need to individually purchase access to the on-line simulation SmartMart at www.ethics-lx.com (details below).

COURSE REQUIREMENTS AND GRADES

ASSIGNMENTS

The class is assessed through a mixture of group and individual assignments as follows:

Assignment Weight Deadline

Group Project 1 – Case Analysis of Strategic Stakeholder Context 20% Week 8

Group Project 2 – Case Presentation of Drive to Action

20% Week 12

Individual Learning Portfolio

(3 documents submitted)1x 10%

2 x 20% =

50%

Week 3 (Understanding Value Creation)

Week 7 (Simulation Exercise)

Week 11 (Negotiation Exercise)

Participation 10%

Group Project 1 and Group Project 2 are based on a single case study, which you are required to analyze in two parts.

In Group Project 1, you should focus on a diagnosis of the situation. In Group Project 2, you should focus on recommending an effective course of action to

face this situation.

Further information on each of these assignments follows below, and additional details will be provided in class.

If you are facing personal circumstances that might interfere with your performance in this class, please alert me as soon as possible and I will try to help you

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complete the course. If you contact me after missing several classes or due dates, my ability to help you will be limited.

If you require special accommodations because of a disability, please advise me immediately.

GROUP PROJECT 1 – CASE ANALYSIS OF STRATEGIC STAKEHOLDER CONTEXT

The purpose of this assignment is to test your understanding of the core concepts of value creation that have been introduced in the first part of the course. You are required to provide an evidence-based analysis of the multiple stakeholder context of a key strategic issue facing an organization (a public firm, or a not-for-profit body or a public sector entity). You will be graded on your ability to effectively diagnose the situation facing the organization, not on providing solutions (that is the focus of group project 2).

Specifically, you are required at a minimum to identify the following in your diagnosis:

What are the relevant value-creating processes involved in this case? Which are the relevant constituencies or stakeholders involved in this case and what are

their value-creating resources, goals, and contributions? What management or governance mechanisms are in effect in this case to create, capture,

or distribute value? What are the key value creation problems or challenges facing the organization in

relation to the strategic issue you are analyzing?

The format of this assignment is a 5-page double spaced written report (15%) plus a 10 minute presentation (5%), after which the group will take questions from the class. To be evaluated for this grade component, you must also submit a full set of presentation slides immediately before your presentation (total 20%) All written work for this course must use 12 pt font and 1 inch margins. You may also include up to another 5 pages of appendices in this report where necessary.

GROUP PROJECT 2 – CASE PRESENTATION OF DRIVE TO ACTION

The purpose of this assignment is to move from understanding to action in a multi-actor context. You are required to identify evidence-based potential courses of action (strategic alternatives) to the case analyzed in Project 1 and assess them according to their potential for effective value creation and appropriate value distribution. You should provide a recommended course of action.

At a minimum, you must include the following in your analysis:

A clear identification of the problem or situation faced by the relevant organization(s) Several plausible alternative courses of action that could be pursued in facing this context A set of relevant criteria for assessing these alternatives in the context of the value

creation process A recommended course of action, together with a feasible implementation plan

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The format of this assignment is a 2 page double-spaced executive summary (5%) plus a case presentation of 10 minutes (15%), followed by questions from the class. To be evaluated for this grade component, you must also submit a full set of presentation slides immediately before your presentation (total 20%). All written work for this course must use 12 pt font and 1 inch margins.

GROUP PROJECT MILESTONES

To ensure groups do not put off thinking about their projects until late in the term, each group must complete the following tasks by the following dates. Failure to do so can negatively affect your project grade.

Groups elect spokesperson by Week 3The instructor will allocate students into groups. The group compositions will be posted on the CMD. By this date, the groups need to have chosen a spokesperson. The spokesperson informs the instructor about the group’s choice and serves as group link to the instructor for the remainder of the term.

Case selection due by Week 5Each group must identify the case—involving a public firm (or a not-for-profit body,

or a public sector entity) —that they would like to analyze by this class. In one paragraph, each group should explain why they think this case should be interesting to analyze. Some challenge related to the management of value creation should be identified that involves several of the stakeholders we address in class. This proposal should be emailed to me prior to the class in week 5. I will either approve the proposal or meet with the group to make suggestions or recommend alternatives.

When selecting their topic, each group needs to ensure it will be able to retrieve the information it will need to complete the project, including firm reports and other publically available data. The spokesperson of each group needs to e-mail me this proposal, while copying the other group members.

All group members will receive the same grade for their project, unless all members of the group request that a different allocation of marks is given. In that case, some adjustment may be made to the individual grades.

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INDIVIDUAL LEARNING PORTFOLIO

The purpose of this assignment is to enable you to reflect on and enhance your own learning experiences in the course.

You are required to submit three documents, each of which must not exceed 3 double- spaced pages in weeks 3, 7 and 11; each of these details a significant personal learning outcome from the course. All portfolio documents must use 12 pt font and 1 inch margins.

The first of these 3 documents is worth 10%, the second and third are each worth 20%; their combined worth is 50%.

Throughout the portfolio, it is essential that you demonstrate: the relevance of individual documents (readings, videos, etc.) to the course goals and objectives; how key ideas and concepts in the course readings can be applied to practice; and the use of empirical evidence to support your claims.

The portfolio will consist of the following:

1. Understanding Value Creation: Due Week 3

What is value creation and why does it matter? Discuss in the context of an organization of your choice by critically applying a theory or concept introduced during week 1 or 2 of the class.

2. Lessons Learned – Smart Simulation: Due Week 7

You are required to log in at www.ethics-lx.com and purchase access to the “SmartMart” simulation. Access will be available starting February 23 (Details will be posted on the CMD). Complete the simulation at home (note: you have ‘one shot’ only). Then write up the main content of the simulation, and explain how you made your decisions (process of dealing with information provided, criteria used, etc). As you present content and process of your decision-making experience, locate the key themes within the readings provided, and identify in detail the main lessons to be learned about the stakeholder management of value creation.

3. Negotiation and Value Creation: Due Week 11

Write up the negotiation exercise conducted in session 10 detailing: (i) the main outcomes of your negotiation; (ii) the key determinants of those outcomes; (iii) the process through which those outcomes were achieved; and (iv) your evaluation of the negotiation as a whole in terms of its role in value creation or distribution.

CLASS PARTICIPATION:

Students are required to attend, be prepared, and make active contributions to classes. The participation grade is determined partly by attendance (5%) and partly by value-adding contributions to class (5%).

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Attendance is calculated as follows:

Number of classes attended

Grade

1-2 03-4 1%5-6 2%7-8 3%9-10 4%11-12 5%

Value-added is determined as follows. At the end of each class I will select several students who have made the best contribution to the class. A good contribution will consist of evidence of preparation, insightful commentary, facilitation and leadership of effective group work, good timekeeping, etc. Every time you are selected, you get an additional 1% or 2%, depending on the quality of this contribution. The maximum score for contribution over the semester is 5% - i.e. you cannot compensate the attendance grade with the contribution grade, and vice-versa. You will be informed of your participation grade only at the end of the course.

GRADING

All assignments will receive a letter grade. This will reflect standard MBA 9 point grading system: A+ = 9; A = 8; A- = 7; B+ = 6; B = 5; B- = 4; C+ = 3; C = 2; C- = 1; F = 0

In accordance with Schulich guidelines, you can anticipate that the average grade for this course (using this nine point scale) will be between 4.7 and 6.1, unless there are exceptional circumstances.

Grades given for assignments are final. There is no negotiation on grades once you have submitted your assignment. If you are unsure of the criteria for assessment, clarify these with me before you submit your work.

Assignments received late will be deducted 5% for each day late, calculated in 24hr periods from the due date/time. Each student is required to keep a backup copy of their assignments.

ACADEMIC INTEGRITY

It is very important to ensure the academic integrity of all the work you submit. If you have any questions about what constitutes plagiarism or how to reference ideas from other resources, please watch the 10 minute briefing provided by Prof. Michael Wade available at:http://msl.stream.yorku.ca/mediasite/viewer/?peid=f314e7e6-7ff5-4e83-be54-2f412a0f587f

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A “toolbox” on academic integrity is also available at http://www.yorku.ca/academicintegrity . The toolbox has sections for students, and general background readings and materials dealing with academic integrity. The student section features a unique Online Tutorial on Academic Integrity.

A hardcopy of each assignment must be handed in before class on its due date. I will use Turnitin this year, which means I will also ask you to submit your assignments to Turnitin before the beginning of that class. This can be done through the web site: http://www.yorku.ca/computing/students/turnitin.html. The Turnitin class code and password will be provided on the CMD, before the first assignment is due. If for some reason you are not comfortable using Turnitin, please let me know and I will propose an alternative approach to ensure academic integrity.

HUMAN PARTICIPANTS

York University has implemented policies guiding the use of human participants in any course-related research. Gathering primary data by talking to anyone in person or on the phone, or asking anyone to complete a survey, requires a formal process and paperwork that verifies you have obtained his or her informed consent. To do this, you must get approval for any such research ahead of time.

In this section, we will do all coursework without the use of human participants. You must not conduct research using human participants for any assignment in this course. This means this particular ethics process and associated paperwork will not be required; however no interviews or surveys may be done by students to gather data. Instead, browsing the trade press and retrieving articles from Proquest (ABI/INFORM) and other public sources should be sufficient to develop in-depth analyses of your cases.

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CLASS SCHEDULE, REQUIRED READINGS, AND ASSIGNMENTS

WEEK 1 (January 12): ORGANIZATIONS AND VALUE CREATION

This class will address three main questions:

What is value creation? What is the role of various organizations—private, public, not-for-profit—in creating and

distributing value? How is this achieved through different modes of governance, including hierarchy, co-

operation, and negotiation?

Required background readings:

Lepak, D.P., Smith, K.G., & Taylor, M.S. 2007. ‘Value creation and value capture: a multilevel perspective’. Academy of Management Review, 32, 180-194.

Ghoshal, S., Bartlett, C.A., & Moran, P. 1999. ‘A new manifesto for management’. Sloan Management Review, 40, 9-20.

Case Discussion:

The introduction of the Tata Nano – The World’s Cheapest Car – Video

“Tata Nano: World's cheapest car is India's answer for cash-strapped drivers”, Randeep Ramesh, The Guardian, Tuesday 24 March 2009

“Inside the Tata Nano factory”, Manjeet Kripalani, Business Week, May 9, 2008

“Is the world's cheapest car on the road to ruin?” George Monbiot blog

WEEK 2 (January 19): BUSINESS, VALUE CREATION & THE VALUE CHAIN

This class will address three main questions:

What is the nature of value creation in the business enterprise? How is value created and managed in supply chains or networks of businesses? What are the implications for value creation for managers in a multi-actor, multi-level

business context?

Required background reading:

Porter, M. E. (1985) Competitive Advantage – Creating and Sustaining Superior Performance, New York: Free Press, 33-61 (Chapter 2).

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Porter, M. E. (2001) “Strategy and the Internet”, Harvard Business Review, March, pages 74-75 ONLY

Required case reading: Marketing the $100 Laptop

WEEK 3 (January 26): SHAREHOLDERS AND STAKEHOLDERS

LEARNING PORTFOLIO DOCUMENT 1 DUE

This class will primarily address two questions:

What is value for shareholders, and what resources do they bring to value creation? What is the relationship of other stakeholders to the firm, and to its shareholders? How do corporations interact with shareholders through capital markets to create value?

Required background readings:

Jensen, M. C. 2001. ‘Value Maximization, Stakeholder Theory, and the Corporate Objective Function.’ Journal of Applied Corporate Finance, 14(3): 8-21.

Handy, C. 2002. ‘What's a business for?’ Harvard Business Review, 80(12): 49-56.

Bughin, J., Copeland, T. E. 1997. ‘The Virtuous Cycle of Shareholder Value Creation’. The McKinsey Quarterly, No. 2, 1997.

In class video: Is Wal-Mart Good for America?

WEEK 4 (FEB 2): THE ROLE OF GOVERNMENT

This class will address three questions:

What value do governments create for society? What is value for governments, and what resources do they bring to value creation in

business? How do firms interact with local, national and international governments to create value?

Required background reading:

Karakowski, L, Carroll, A.B., Buchholtz, A.K. 2005. Business and Society: Ethics and Stakeholder Management, Chapter 10: Business, Government, and Regulation, Toronto: Nelson, pp. 305-335.

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Required case reading:“Adapting to Climate Change: the Case of Suncor Energy and the Alberta Oil Sands, (Ivey Case Ref. #9b08M073, Version: (A) 2008-11-18)

WEEK 5 (February 9): THE ROLE OF NGOS

This class will address three issues:

What value do NGOs create for society? What is value for NGOs and what resources do they bring to value creation in business? How do firms interact with national and international NGOs to create value?

Required background readings:

Moore, M. H. 2000. Managing for Value: Organizational Strategy in For-Profit, Nonprofit, and Governmental Organizations. Nonprofit and Voluntary Sector Quarterly, 29: 183-208.

Bradach, J.L., Tierney, T.J. and Stone, N. (2008) Delivering on the Promise of Nonprofits, Harvard Business Review, December, December: 88-97.

Required case reading:The San Franciso Symphony (Stanford Business School)

WEEK 6 (FEB 16): THE ROLE OF CONSUMERS AND EMPLOYEES

GUEST SPEAKERS: Hadley Archer, WWF Canada and Dave Moran, Coca-Cola Canada(to be confirmed)This class will primarily address two issues

What is value for consumers, and what is value for employees; what resources do both groups bring to value creation?

How do businesses interact with consumers and with employees to create value?

Required background readings:

McGovern, G., Moon, Y. 2007. ‘Companies and the customers who hate them’ Harvard Business Review, June: 78-84.

Christensen, C.M., Cook, S., & Hall, T. 2005. ‘Marketing Malpractice – The Cause and the Cure’, Harvard Business Review, December: 74-83.

Bartlett, C.A., & Sumantra, G. 2002. ‘Building competitive advantage through people.’ MIT

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Sloan Management Review 43, 34-41.

February 23 - NO CLASS: Reading Week

WEEK 7 (March 2): MANAGING STAKEHOLDERS

LEARNING PORTFOLIO DOCUMENT 2 DUE

This class will primarily address two issues:

How can business identify relevant stakeholders and their resources and power? How can businesses manage stakeholders to create value?

We will conduct a detailed in-class debrief of the Smart-Mart simulation and relate the lessons to the concepts presented in the background reading.

Required background readings:Carroll, A.B. and Buchholtz, A.K. 2008. Business & Society: Ethics and Stakeholder Management, South-Western Cengage Learning, Chapter 3 (“The Stakeholder Approach to Business, Society, and Ethics”), pp. 81-117.

WEEK 8 (March 9): GROUP PRESENTATIONS

GROUP PROJECT 1 DUE

In this class each group will present their case analysis required for Group Assignment 1 and submit their written report. Teams will be coached on their case analysis skills, presentation skills, and their ability to tell a compelling story.

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WEEK 9 (March 16): DRIVE TO ACTION—CREATING VALUE THROUGH COLLABORATION, COMPETITION, AND CONFLICT

This class will consider the following questions:

How can managers in different organizations create value in a multi-actor context? Is value creation a zero-sum game or are win-win outcomes possible? In what ways can businesses interact with one another and with other actors, and how can

value be generated through competition, collaboration and conflict?

Required background readings:

Brandenburger, A.M., Nalebuff, B.J. 1995. The Right Game: Use Game Theory to Shape Strategy, Harvard Business Review, July-August, 57-71.

Brugmann, J., Prahalad, C.K. 2007. ‘Co-creating Business's New Social Compact’. Harvard Business Review 85, 80-90.

WEEK 10 (March 23):

DRIVE TO ACTION — PRINCIPLES AND PRACTICES OF NEGOTIATION

In this class, students will participate in a hands-on experiential exercise of stakeholder negotiation in order to address the following questions:

What are the core principles and practices of negotiation? What positions and perspectives do different stakeholders bring with them in negotiation

contexts? How do different stakeholders interact with one another through negotiation?

Required background readings:

Wheeler, M. 2002. ‘Negotiation Analysis: An Introduction’. Harvard Business School, HBS 9-801-156, June 13, 1-14.

Sebenius, J.K. 2001. ‘Six habits of merely effective negotiators’. Harvard Business Review, April 2001, 87-95.

In-class negotiation exercise: Big Pipeline in Swagwit (to be distributed in class)

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WEEK 11 (March 30):

DRIVE TO ACTION—NEGOTIATING IN A MULTIPLE STAKEHOLDER CONTEXT

LEARNING PORTFOLIO DOCUMENT 3 DUE

In this class students will explore the challenges of scaling-up negotiation to a complex, multiple stakeholder context in order to address the following questions:

What are the issues and challenges in negotiating amongst multiple constituencies to create and distribute value?

What skills and capacities are required for effective leadership in this context? What is the contribution of negotiation to societal and organizational value creation?

Optional background reading (to be posted on the CMD):

Thompson, L. L. 2005. ‘Most Common Pie-Expanding Errors’. The Mind and Heart of the Negotiator, Third Edition, pp. 74-87.

In-class video: “Rebuilding the World Trade Center Site,” 2007. Exercise on multi-party negotiation, developed by Program on Negotiation at Harvard Law School

WEEK 12 (April 6): DRIVE TO ACTION – FORGING INTEGRATIVE STRATEGY

GROUP PROJECT 2 DUE

In this final class, each group will present their final case analysis and recommendations. The goals of this exercise are to:

Demonstrate the ability of students to apply integrative strategic thinking to the management of value creation in a complex stakeholder context

Demonstrate the ability of students to create a compelling story for making a leadership difference in the management of value creation

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