Exploring Corporate Strategy 7 th Edition

1. ExploringCorporate Strategy7th Edition Part II The Strategic Position

2. ExploringCorporate Strategy7th Edition Chapter 4 Expectations and Purposes

3. Expectations and Purposes - Outline • Corporate governance • Organisational stakeholders • Stakeholder mapping • Ethical issues • Culture • Cultural web • Communication of organisational purposes

4. Role of People • 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

5. Expectations andPurposes Exhibit 4.1

6. 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

7. The Chain of Corporate Governance Source: Adapted from David Pitt-Watson, Hermes. Exhibit 4.2

8. 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

9. Governance Chain - Issues • Conflicts of interest • Directors’ responsibilities to shareholders • Accountability to stakeholders • Structure of targets, budgets and rewards

10. Corporate GovernanceReforms (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

11. Corporate GovernanceReforms (2) • Real requirements: • Changes in board behaviour • Strategic approach

12. 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?

13. Strengths and Weaknesses of Governance Systems Source: Adapted from T. Clarke and S. Clegg, Changing Paradigms: The transformation of management knowledge forthe 21century, HarperCollins Business, 2000, Table 6.5, p. 324. st Exhibit 4.3a

14. Strengths and Weaknesses of Governance Systems Source: Adapted from T. Clarke and S. Clegg, Changing Paradigms: The transformation of management knowledge forthe 21century, HarperCollins Business, 2000, Table 6.5, p. 324. Exhibit 4.3b

15. 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

16. 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

17. 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

18. 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

19. 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 who depend on the organisation to fulfil their own goals and on whom the organisation depends

20. External Stakeholders

21. Some common conflicts of expectations Exhibit 4.4

22. 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 loyalty Adapted from Exh. 4.4

23. Stakeholder Mapping: the Power/Interest Matrix Source: Adapted from A. Mendelow, Proceedings of the Second International Conference on Information Systems, Cambridge, MA, 1991. Exhibit 4.5

24. 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?

25. Sources and indicators of power Exhibit 4.6

26. Sources of Power Adapted from Exh. 4.6

27. Indicators of Power Adapted from Exh. 4.6

28. 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

29. Business ethics – the societal expectations of organisations (2) • Individual level • Behaviour and actions of individuals within organisations

30. Four Possible Ethical Stances Exhibit 4.7

31. Some questions of corporate social responsibility Exhibit 4.8a

32. Some questions of corporate social responsibility Exhibit 4.8b

33. Corporate Social Responsibility Adapted from Exh. 4.8

34. Organisational Culture “The basicassumptions and beliefsthat areshared by members of an organisation,that operateunconsciouslyand define in a basictaken-for-grantedfashion an organisation’sview of itself and its environment” Schein 1997

35. Cultural Frames of Reference Exhibit 4.9

36. 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

37. Organisational Field (2) • Legitimacy: • Need to meet expectations in terms of assumptions, behaviours and strategies

38. Organisational Culture Exhibit 4.10

39. The Cultural Web Exhibit 4.11

40. 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

41. Key Points (1) • Expectations and purposesinfluenced 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

42. 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

43. The Cultural Web: some useful questions Exhibit 4.12

44. The business idea at Kindercare Source: Prepared by Michel Bougon, Bryant College, Smithfield, USA. Exhibit II.ii