Exploring Corporate Strategy
7th Edition
Part II
The Strategic
Position
Slide 4.1
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Exploring Corporate Strategy
7th Edition
Chapter 4
Expectations and Purposes
Slide 4.2
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Expectations and Purposes - Outline
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Corporate governance
Organisational stakeholders
Stakeholder mapping
Ethical issues
Culture
Cultural web
Communication of organisational purposes
Slide 4.3
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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
Slide 4.4
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Expectations and Purposes
Slide 4.5
Exhibit 4.1
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Corporate Governance
The governance framework
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whom the organisation serves
how the purposes and priorities should be decided
how an organisation should function
how power is distributed among stakeholders
Slide 4.6
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
The Chain of Corporate Governance
Source: Adapted from David Pitt-Watson, Hermes.
Slide 4.7
Exhibit 4.2
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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
Slide 4.8
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Governance Chain - Issues
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•
•
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Conflicts of interest
Directors’ responsibilities to shareholders
Accountability to stakeholders
Structure of targets, budgets and rewards
Slide 4.9
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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
Slide 4.10
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Corporate Governance Reforms (2)
• Real requirements:
– Changes in board behaviour
– Strategic approach
Slide 4.11
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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?
Slide 4.12
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Strengths and Weaknesses of Governance
Systems
Source: Adapted from T. Clarke and S. Clegg, Changing Paradigms: The transformation of management knowledge for
the 21st century, HarperCollins Business, 2000, Table 6.5, p. 324.
Slide 4.13
Exhibit 4.3a
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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.
Slide 4.14
Exhibit 4.3b
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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
Slide 4.15
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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
Slide 4.16
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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
Slide 4.17
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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
Slide 4.18
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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
Slide 4.19
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
External Stakeholders
Stakeholders
Market
Examples
Influence
Suppliers, competitors,
distributors, shareholders
Economic/value
creation
Social/
political
Policy makers, regulators,
government agencies
Social legitimacy
Technological
Key adopters, standards
agencies, owners of
competitive technologies
Diffusion of new
technology/
adoption of industry
standards
Slide 4.20
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Some common conflicts of expectations
Slide 4.21
Exhibit 4.4
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Conflict of Expectations
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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
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Slide 4.22
Stakeholder Mapping: the Power/Interest Matrix
Source: Adapted from A. Mendelow, Proceedings of the Second International Conference on Information Systems,
Cambridge, MA, 1991.
Slide 4.23
Exhibit 4.5
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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?
Slide 4.24
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Sources and indicators of power
Slide 4.25
Exhibit 4.6
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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 Through internal links
skills
Control of the environment
Involvement in strategy
implementation
Adapted from Exh. 4.6
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Slide 4.26
Indicators of Power
Within organisations
External stakeholders
Status
Status
Claim on resources
Resource dependence
Representation
Negotiating arrangements
Symbols
Symbols
Adapted from Exh. 4.6
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Slide 4.27
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
Slide 4.28
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Business ethics –
the societal expectations of organisations (2)
• Individual level
– Behaviour and actions of individuals within
organisations
Slide 4.29
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Four Possible Ethical Stances
Slide 4.30
Exhibit 4.7
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Some questions of corporate social
responsibility
Slide 4.31
Exhibit 4.8a
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Some questions of corporate social
responsibility
Slide 4.32
Exhibit 4.8b
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Slide 4.33
Organisational Culture
“The basic assumptions and beliefs that are
shared by members of an organisation, that
operate unconsciously and define in a basic
taken-for-granted fashion an organisation’s
view of itself and its environment”
Schein 1997
Slide 4.34
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Cultural Frames of Reference
Slide 4.35
Exhibit 4.9
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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
Slide 4.36
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Organisational Field (2)
• Legitimacy:
– Need to meet expectations in terms of
assumptions, behaviours and strategies
Slide 4.37
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Organisational Culture
Slide 4.38
Exhibit 4.10
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
The Cultural Web
Slide 4.39
Exhibit 4.11
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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
Slide 4.40
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
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
Slide 4.41
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Key Points (2)
• Culture
– Levels of cultural frames of reference
– Layers of values, beliefs, behaviours and takenfor-granted assumptions
– Cultural web
• Communication of organisational purposes
– Values, mission, objectives
Slide 4.42
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
The Cultural Web: some useful questions
Slide 4.43
Exhibit 4.12
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
The business idea at Kindercare
Source: Prepared by Michel Bougon, Bryant College, Smithfield, USA.
Slide 4.44
Exhibit II.ii
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005