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Exploring Corporate Strategy 7th Edition

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Title: Exploring Corporate Strategy 7th Edition


1
Exploring Corporate Strategy7th Edition
Part II The Strategic Position
2
Exploring Corporate 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
    organisations purposes

5
Expectations and Purposes
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 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

11
Corporate Governance Reforms (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 for the 21 century,
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 for the 21 century,
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
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
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
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
27
Indicators of Power
Within organisations External stakeholders
Status Status
Claim on resources Resource dependence
Representation Negotiating arrangements
Symbols Symbols
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
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
34
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
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 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

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
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