Exploring Corporate Strategy 7th Edition

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Exploring Corporate Strategy7th Edition
Part II The Strategic Position
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Exploring Corporate Strategy7th Edition
Chapter 4 Expectations and Purposes
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Expectations and Purposes - Outline

• Corporate governance
• Organisational stakeholders
• Stakeholder mapping
• Ethical issues
• Culture
• Cultural web
• Communication of organisational purposes

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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
  organisations purposes

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Expectations and Purposes
Exhibit 4.1
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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

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

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Governance Chain - Issues

• Conflicts of interest
• Directors responsibilities to shareholders
• Accountability to stakeholders
• Structure of targets, budgets and rewards

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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

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Corporate Governance Reforms (2)

• Real requirements
• Changes in board behaviour
• Strategic approach

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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?

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Strengths and Weaknesses of Governance Systems
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
Exhibit 4.3a
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Strengths and Weaknesses of Governance Systems
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.
Exhibit 4.3b
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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

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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

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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

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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

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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
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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
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Some common conflicts of expectations
Exhibit 4.4
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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
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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
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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?

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Sources and indicators of power
Exhibit 4.6
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Sources of Power
Within 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
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Indicators of Power
Within organisations External stakeholders
Status Status
Claim on resources Resource dependence
Representation Negotiating arrangements
Symbols Symbols
Adapted from Exh. 4.6
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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

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Business ethics the societal expectations of
organisations (2)

• Individual level
• Behaviour and actions of individuals within
  organisations

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Four Possible Ethical Stances
Exhibit 4.7
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Some questions of corporate social responsibility
Exhibit 4.8a
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Some questions of corporate social responsibility
Exhibit 4.8b
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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
Adapted from Exh. 4.8
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Organisational Culture
The basic assumptions and beliefs that
areshared by members of an organisation,
that operate unconsciously and define in a
basictaken-for-granted fashion an
organisationsview of itself and its
environment Schein 1997
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Cultural Frames of Reference
Exhibit 4.9
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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

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Organisational Field (2)

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

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Organisational Culture
Exhibit 4.10
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The Cultural Web
Exhibit 4.11
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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

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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

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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

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The Cultural Web some useful questions
Exhibit 4.12
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The business idea at Kindercare
Source Prepared by Michel Bougon, Bryant
College, Smithfield, USA.
Exhibit II.ii