SM A10 Purpose Shareholder Value and Stakeholders
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Transcript of SM A10 Purpose Shareholder Value and Stakeholders
7/28/2019 SM A10 Purpose Shareholder Value and Stakeholders
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Strategic Management
Purpose, shareholder value,
and stakeholders
Prof.Dr. E.Vatchkova
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Contents
1. Identifying stakeholders2. The political power in the organization
3. Sources of power
4. Stakeholder mapping
5. Power/dynamism matrix6. Power/interest matrix
7. Conflicts of expectations
8. Managerial values
9. Ethical issues10. Cultural frames
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Freeman’s definition (1984)
“Any group or individual who can
affect or is affected by the
performance of an organization”
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Stakeholders concept is valuable
when:
The organizational objectives are defined
Specific strategic developments will takeplace
The strategic choice is to be made
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Groups of stakeholders
External stakeholders
The state
Customers
Suppliers
Financial institutions
Shareholders
Unions
Media
Internal stakeholders
Managers
Employees
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Power
The ability of individuals or
groups to persuade, induce or
coerce others into followingcertain courses of action
The organization is a
political arena
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Source of power within the
organization
Hierarchy (formal)
Influence (informal)
Control of strategic resourcesPossession of knowledge and skills
Control of the environment
Involvement in strategy implementation
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Sources of power for external
stakeholders
Control of strategic resources
Involvement in strategy implementationPossession of knowledge (skills)
Through internal links
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Indicators of power
Internal stakeholders
1. Status
2. Claim on resources
3. Representation
4. Symbols
External stakeholders
1. Status
2. Resource
dependence
3. Negotiating
arrangements4. Symbols
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Stakeholders mapping – assessing
the importance of stakeholder
expectations How likely each stakeholder is to impress
its expectations on the company
Whether they have the means to do so
(assessment of power)
The likely impact of stakeholder
expectations on future strategies
P /d i t i
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Power /dynamism matrix
A
Few
problems
B
Unpredictable but
manageable
C
Powerful
but
predictable
D
Greatest danger or
opportunities
Predictability
Power
Low
LowHigh
High
Adapted from Mendelow, 1999
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Power / interest matrix
A
Minimal
effort
B
Keep
informed
C
Keep
satisfied
D
Key players
Level of interest
Power
Low High
Low
High
Adapted from Mendelow, 1999
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Stakeholders expectations(1)
Shareholders:
Annual dividends
Increasing the value of their investments in
the company as the share price increases
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Stakeholders expectations(2)
Managers
salaries and bonuses
proxy paymentsresponsibility
challenge
working for a well known andprestigious company
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Stakeholders expectations(3)
Employees
wages
holidays job satisfaction
working conditions
security
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Stakeholders expectations(4)
Consumers
desirable and quality productscompetitive prices
new products at appropriate time
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Stakeholders expectations(5)
Distributors
on time and reliable deliveries
Suppliers
constant orderspayment on time
Financers
interest payments
loan repayments
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Stakeholders expectations(6)
Government
payment of taxes
provision of employmentcontribution to the nation’s exports
Society in general
socially responsible actions
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Common conflicts of
expectations
Growth – profitability
Cost efficiency – jobs
Volume – qualitySavings in one SBU –increased spending
in elsewhere
Division’s belonging to two organizationalfields
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Definition
Values are broad, general beliefs about
some way of behaving or some end state
is preferable to the individual
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The influence of values
The way other individuals and groups areperceived, thereby influencing interpersonalrelationships
The decisions and problem solutionsThe perception of situations
The criteria for ethical behavior
The acceptation or resistance to organizational
goalsThe ways to achieve the success
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Types of values
Theoretical – order, system, logicEconomic – usefulness and practicability
Aesthetic – art and beauty
Social – people and their welfarePolitical – power over people and things
Religious – unity and harmony
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The political and cultural aspect
of the organization
1.Whom the organization does actuallyserve?
The concept of stakeholders
2. Which purposes an organization shouldfulfill?
Ethical considerations
3. Which purposes are actually prioritized?The cultural concepts
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Some questions of CSR J&S,02
Internal aspects
Employee welfare
Working conditions
Job design
Intellectual property
External aspects
Green issues
Products
Markets andmarketing
Suppliers
EmploymentCommunity activity
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The cultural web
Paradigm
Stories
Symbols
Power
Routines and
rituals
Control
Organizationalstructures
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Expectations and purposes model
Corporate governanceBusiness ethics
Stakeholders Cultural context
Organizational
Purposes•Mission•Objectives
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Managing for shareholder value
General consideration:How to make the business value-based?
Objective:
Maximizing shareholder value over time
Strategy:
Significant change in management
Action tasks (initiatives)
Key steps (initiatives) 1
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Key steps (initiatives) 1
(Cadbury-Schweppes plc,1966)
1. Preparing a multi-year blueprint for the many
changes to make the business value-based
2. Identify sources of value creation and
destruction, using financial and performance
measures: Economic profit
Return on total invested capital
Earning growth
Free cash flow
3. Set performance targets
4. Manage day-to day performance
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Key steps (initiatives) 2
(Cadbury-Schweppes plc,1966)
5. Focusing business strategies on thesearch for profitable growth
6. Creating short- and long term incentive
plans for senior managers7. Reviewing the value performance of all
the businesses
8. Delivering awareness and trainingsessions on managing for value (top 300
executives worldwide)
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Key steps (initiatives) 3
(Cadbury-Schweppes plc,1966)
9. Carrying two pilot studies in core group
businesses (produce “value champions”)
10. Establishing the first “rolling strategic
management agenda” for the board:
list of issues
managers in charge
value-maximizing decisions
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Funding strategies in different
circumstances: the Growth/share matrix
Growth (Stars)Business risk: High
Financial risk needs to be: Low
Funding by: Equity (growth
investors)
Dividends: Normal
Launch (Question marks)Business risk needs to be: Very
high
Financial risk: Very low
Funding by: Equity
(venture capital)
Dividends: Zero
Maturity (Cash cow)
Business risk: Medium
Financial risk can be: Medium
Funding by: Debt and equity
(retaining earnings)
Dividends: High
Decline (dogs)
Business risk: Low
Financial risk can be: High
Funding by: Debt
Dividends: Total
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