Taiz master program Engineering & Management Course Strategic management Strategic position (ECS adapted)

1. Taiz master program Engineering & Management Course Strategic managementStrategic position (ECS adapted) Lecturer : John L Simons www.jlsimons.org j.l.simons@rug.nl SM 2010 4a

2. 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 SM 2010 4a

3. How about our ethics ? SM 2010 4a

4. 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 SM 2010 4a

5. Exhibit 4.1 Influences on Strategic Purpose Governance structure Strategic purpose Stakeholder expectations Social responsibility and ethics SM 2010 4a

6. What are Stakeholders? Stakeholdersare those individuals or groups who depend on an organisation to fulfil their own goals and on whom, in turn, the organisation depends. SM 2010 4a

7. What is Corporate Governance? Corporate governanceis concerned with the structures and systems of control by which managers are held accountable to those who have a legitimate stake in an organisation. SM 2010 4a

8. Exhibit 4.2 The Chain of Corporate Governance SM 2010 4a

9. 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? SM 2010 4a

10. 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 SM 2010 4a

11. Exhibit 4.3 Benefits and Disadvantages of Governance SM 2010 4a

12. Guidelines for Boards • Operate independently of management (no old boys networking) • Be competent to scrutinize the activities of management • Have time to do job properly • Behave appropriately given expectations for trust, role fluidity, collective responsibility, and performance SM 2010 4a

13. Ownership Choices Private or public ownership of equity Sale of all or part Acquisition Mutual ownership and partnership Privatisation SM 2010 4a

14. 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. SM 2010 4a

15. SM 2010 4a

16. Stances on Social Responsibility Laissez-faire Enlightened self-interest Forum for stakeholder interaction Shaper of society SM 2010 4a

17. BP and The Gulf Disaster SM 2010 4a

18. 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? SM 2010 4a

19. Exhibit 4.7 Stakeholders of a Large Organisation SM 2010 4a

20. What is Stakeholder Mapping? Stakeholder mappingidentifies stakeholder expectations and power and helps in understanding political priorities. SM 2010 4a

21. Exhibit 4.9 The Power/Interest Matrix SM 2010 4a

22. 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? SM 2010 4a

23. What is Power? Poweris the ability of individuals or groups to persuade, induce, or coerce others into following certain courses of action. Different from management ??? SM 2010 4a

24. Sources of Power Within Organisations Hierarchy Influence Involvement Control of human resources Control of strategic resources Knowledge possession SM 2010 4a

25. Sources of Power For External Stakeholders Control of strategic resources Involvement Knowledge possession Informal links to internal power SM 2010 4a

26. Indicators of Power For Within Organisations Status Resource claims Symbols Representation SM 2010 4a

27. Indicators of Power For External Stakeholders Status Symbols Resource dependence Negotiating arrangements SM 2010 4a

28. Organisational Purposes • Values • Mission statement • Vision statement • Objectives SM 2010 4a

29. What are Core Values? Core values are the underlying principles that guide an organisation’s strategy. SM 2010 4a

30. 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. SM 2010 4a

31. Mission and Vison in practice Find on the net the mission and vision of • A yemeni firm • A US or UK firm • A multinational Do they underline this difference in mission and vision ? SM 2010 4a

32. What are Objectives? Objectives are statements of specific outcomes that are to be achieved. Objectives must be measurable. Compare with course objectives !!! SM 2010 4a

33. Chapter Summary (1) • The purpose of an organisation will be influenced by expectations of shareholders • Governance chains reveal the links between ultimate beneficiaries and management • The shareholder model and the stakeholder model are the two generic governance systems • Stakeholder analysis reveals the influence of different stakeholders SM 2010 4a

34. Chapter Summary (2) • Ethical dimensions of organisational purpose are expressed via organisational approach to corporate social responsibility as well as by individual resolution of ethical dilemmas • Managers must decide how the organisation should express its strategic purpose through values, vision, mission, and objectives SM 2010 4a

35. Case Example: Product Red and Gap (1) SM 2010 4a

36. Case Example: Product Red and Gap (2) • (Red) was created by Bono and Bobby Shriver, Chairman of DATA, to raise awareness and money for The Global Fund. • It seeks to do so by teaming up with the world’s most iconic brands to produce Red-branded products, a percentage of which is then given to the Fund. SM 2010 4a

37. Case Example: Product Red and Gap (3) • Gap is a brand participant. It seeks to provide responsible sourcing of its products, some of which are produced in Red beneficiary areas. • In contrast, an article in The Times criticised the promotion of shopping as a response to societal issues, further asking whether this was a good use of shareholder funding. SM 2010 4a

38. Case Example: Product Red and Gap (4) • What is the rationale of the founders of Product Red? • What views might shareholders of Gap have of Product Red? • Is Product Red an appropriate corporate activity? • Apply a stakeholder analysis to assess how you could convince management of another company to join this initiative. SM 2010 4a