slide 4. 1 exploring corporate strategy, seventh edition, © pearson education ltd 2005 exploring...

1Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005

Exploring Corporate Strategy7th Edition

Part II

The Strategic

Position


Chapter 4

Expectations and Purposes

Exploring Corporate Strategy7th Edition


Expectations and Purposes - Outline

• Corporate governance

• Organisational stakeholders

• Stakeholder mapping

• Ethical issues

• Culture

• Cultural web

• Communication of organisational purposes


• 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


Expectations and Purposes

Exhibit 4.1


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


The Chain of Corporate Governance

Exhibit 4.2

Source: Adapted from David Pitt-Watson, Hermes.


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


Governance Chain - Issues

• Conflicts of interest

• Directors’ responsibilities to shareholders

• Accountability to stakeholders

• Structure of targets, budgets and rewards


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


Corporate Governance Reforms (2)

• Real requirements:– Changes in board behaviour– Strategic approach


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?


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


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.


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


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


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


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


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


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


Some common conflicts of expectations

Exhibit 4.4


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


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.


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?


Sources and indicators of power

Exhibit 4.6


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


Indicators of Power

Within organisations External stakeholders

Status Status

Claim on resources Resource dependence

Representation Negotiating arrangements

Symbols Symbols



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


Business ethics – the societal expectations of organisations (2)

• Individual level– Behaviour and actions of individuals within

organisations


Four Possible Ethical Stances

Exhibit 4.7


Some questions of corporate social responsibility

Exhibit 4.8a


Some questions of corporate social responsibility

Exhibit 4.8b


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



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


Cultural Frames of Reference

Exhibit 4.9


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


Organisational Field (2)• Legitimacy:

– Need to meet expectations in terms of assumptions, behaviours and strategies


Organisational Culture

Exhibit 4.10


The Cultural Web

Exhibit 4.11


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


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


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


The Cultural Web: some useful questions

Exhibit 4.12


The business idea at Kindercare

Exhibit II.iiSource: Prepared by Michel Bougon, Bryant College, Smithfield, USA.

slide 4. 1 exploring corporate strategy, seventh edition, © pearson education ltd 2005 exploring...

Documents