The Strategic Position4: Strategic Purpose

4-2Exploring Corporate Strategy 8e, © Pearson Education 2008

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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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

Be competent to scrutinise 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-faire Enlightened self-interest

Forum for stakeholderinteraction Shaper of society

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BP and The Texas City 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.

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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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What are Objectives?

Objectives are statements of specific outcomes

that are to be achieved.

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Case Example: Product Red and Gap

What is the rationale of the founders of Product Red?

Is Product Red an appropriate corporate activity?