Po b lecture 2 purpose of business students
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Transcript of Po b lecture 2 purpose of business students
Principles of Business
Purpose of Business – Part 2
2
Overview• Discuss the notion of the free market and concepts of the
invisible hand; critically evaluating the role of business from shareholder value to stakeholder value and sustainability
• Illustrate how organisations are founded and the role of having a purpose and vision in a number of the most impactful and successful businesses e.g Apple, Microsoft and Facebook
• Evaluating the multiple environments in which business operate
• Discuss major trends in globalisation including KPIs of different fast growing countries
• Determine how organisations can do business across borders
• Highlight the major challenges; political, cultural, social and logistical of doing business globally
3
Learning Outcomes
• Critically evaluate the changing nature and role of business
• Determine the role of corporate purpose and vision
• Articulate the multiple environments a business operates in
• Critically evaluate the challenges and
opportunities for businesses operating on a global scale
Role of the free market
It is not from the benevolence of the
butcher, the brewer or the baker, that we expect our
dinner, but from their regard to their own self
interest. We address ourselves, not to their
humanity but to their self-love, and never talk to
them of our own necessities but of their
advantages.
Adam Smith
Characteristics of a free-market; the invisible hand
According to the invisible hand theory, each of us, acting in our own self-interests, generates a demand for goods and services that compels others to deliver
those goods and services in the most efficient manner so that they may be able to receive
compensation from others and make a profit in doing so. In this process, resources are allocated in the most efficient manner, in contrast to a process that relies on a centrally planned system.
An explanation in 60 seconds
View Video: https://www.youtube.com/watch?v=ulyVXa-u4wE
However is it always efficient?
Inefficiencies in the market
Moral Hazard Principle-Agent & Information Asymmetry
Monopolistic CompetitionPublic Interest or Good & Externalities
An example of a free market fall out: The Credit Crisis
View video: https://www.youtube.com/watch?v=bx_LWm6_6tA
10
The visible hand:A new form of state capitalism
Source: Economist, 2014
The invisible hand: A myth?
View video: https://www.youtube.com/watch?v=9qjvwQrZmpk
Organisations are to moving beyond self-interest
Why have a Corporate Mission or Vision?
“Data from a 10 year growth study of more than 50,000 brands showed companies with a purpose at the centre of all they do, outperform the market by 400 percent.”
Jim Stengal, Ex-CMO
Procter & Gamble
A Vision Drives
65% to go the extra
mile
2nd most important
hiring reason
64% would be
more loyal
Source: Calling Brands’ survey, You Gov, 2013
The Ashridge Mission Model
Why the company exists
Policies and behaviour patterns
Competitive Position &
Com
petenciesW
hat t
he c
ompa
ny b
elie
ves
in
Success Factors
Source: Ranchhod and Gurau, 2007:16
Market Defined Mission Statement
According to Kotler et al (2013), a mission statement is “a statement of the organisation’s purpose – what it wants to accomplish in the larger environment”
Why
How
What
“Model of Purpose” by Simon Sinek
View video: http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action
Consider the role of the founder in creating a mission
Purpose & Culture
Multiple Environments of Business
Source: Bovee, et al, 2013
PE(D)ST Analysis
Economics
Technology
Social
Political
Demographics
EVIDENCE BASED REGULATION
INCREASE IN REGULATOR
ENFORCEMENT
GLOBAL REGULATION & PRIVACY
ASSET PRICES INCREASE
UK RECOVERYROLE OF SOCIAL
FINANCE
60% LIVING IN URBAN AREAS (50% NOW)
5M MORE OVER 65’S>SINGLE PERSON HOMES AND <30S LIVING W PARENTS
ASSET PRICES INCREASE
UK RECOVERYROLE OF SOCIAL
FINANCE
Open vs Closed Mobile & Tablet Digitisation
Conduct a stakeholder analysis
Source: www.staekholdermap.com
Increase in and application of technology
Liberalization of cross-border trade
and resource movements
Forces Driving Globalization
Development of services that support international
business
Growth of consumer pressures
Increased global competition
Forces Driving Globalization
Changing political situations and government
policies
Expanded cross-national
cooperation
Trends in globalisation: Trading blocks
Source: Daniels et al, 2013
Members of Major Trading Blocs
Source: Daniels et al, 2013
FDI Inflows and Outflows
Source: Daniels et al, 2013
Various ways of doing business internationally
Source: Bovee et al, 2013
Challenges in doing business globally
• The external environment affects a company’s international operations
• Managers must understand social science disciplines and how they affect functional business fields
• Consider:
Physical Factors
Social Factors
Competitive Factors
Physical and Social Factors
• Geographic influences– natural conditions influence business locations
• Political policies– countries determine where and how business occurs
within their borders
• Legal policies– influence how a company operates
• Behavioral factors– may require adaptation in to local conditions
• Economic forces – explain differences in costs, currency values, market size
The Competitive Environment
• Competitive strategy for products– Cost strategy– Differentiation strategy– Focus strategy
• Company resources and experience– market leaders have more resources for international
operations
• Competitors faced in each market– local or international
30
Essential work for next week
• Please consult the OLE for details of:– Essential readings*– Seminar/workshop preparation work*– Recommended further readings– Any additional learning
* Essential readings and preparation work must always be completed in time for the next session
Appendix – Sources for illustrations
Slide 4:www.whatiseconomics.org
Slide 5:www.thebillyleepontificator.com
Slide 7:www.jupiterjenkins.com
Slide 8:www.imbd.com
Slide 16:www.bombsbeat.com
Slide 14: www.cartoonwork.com
Slide 15: www.unilever.com
Slide 16: www.ted.com
End of presentation
© Pearson College 2013