1. SM 2010 4a1 Taiz master program Engineering & Management Course Strategic management Strategic position (ECS adapted) Lecturer : John L Simons www.jlsimons.org j.l.simons@rug.nl

2. SM 2010 4a2 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

3. SM 2010 4a3 How about our ethics ?

4. SM 2010 4a4 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

5. SM 2010 4a5 Exhibit 4.1 Influences on Strategic Purpose Strategic purpose Governance structure Social responsibility and ethics Stakeholder expectations

6. SM 2010 4a6 What are Stakeholders? Stakeholders are those individuals or groups who depend on an organisation to fulfil their own goals and on whom, in turn, the organisation depends.

7. SM 2010 4a7 What is Corporate Governance? Corporate governance is concerned with the structures and systems of control by which managers are held accountable to those who have a legitimate stake in an organisation.

8. SM 2010 4a8 Exhibit 4.2 The Chain of Corporate Governance

9. SM 2010 4a9 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?

10. SM 2010 4a10 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

11. SM 2010 4a11 Exhibit 4.3 Benefits and Disadvantages of Governance

12. SM 2010 4a12 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

13. SM 2010 4a13 Ownership Choices Private or public ownership of equity Sale of all or part Acquisition Mutual ownership and partnership Privatisation

14. SM 2010 4a14 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.

15. SM 2010 4a15

16. SM 2010 4a16 Stances on Social Responsibility Laissez-faire Enlightened self-interest Forum for stakeholder interaction Shaper of society

17. SM 2010 4a17 BP and The Gulf Disaster

18. SM 2010 4a18 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?

19. SM 2010 4a19 Exhibit 4.7 Stakeholders of a Large Organisation

20. SM 2010 4a20 What is Stakeholder Mapping? Stakeholder mapping identifies stakeholder expectations and power and helps in understanding political priorities.

21. SM 2010 4a21 Exhibit 4.9 The Power/Interest Matrix

22. SM 2010 4a22 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?

23. SM 2010 4a23 What is Power? Power is the ability of individuals or groups to persuade, induce, or coerce others into following certain courses of action. Different from management ???

24. SM 2010 4a24 Sources of Power Within Organisations Hierarchy Influence Control of strategic resources Knowledge possession Control of human resources Involvement

25. SM 2010 4a25 Sources of Power For External Stakeholders Control of strategic resources Knowledge possession Informal links to internal power Involvement

26. SM 2010 4a26 Indicators of Power For Within Organisations Status Symbols Representation Resource claims

27. SM 2010 4a27 Indicators of Power For External Stakeholders Status Symbols Negotiating arrangements Resource dependence

28. SM 2010 4a28 Organisational Purposes  Values  Mission statement  Vision statement  Objectives

29. SM 2010 4a29 What are Core Values? Core values are the underlying principles that guide an organisation’s strategy.

30. SM 2010 4a30 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.

31. SM 2010 4a31 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 ?

32. SM 2010 4a32 What are Objectives? Objectives are statements of specific outcomes that are to be achieved. Objectives must be measurable. Compare with course objectives !!!

33. SM 2010 4a33 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

34. SM 2010 4a34 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

35. SM 2010 4a35 Case Example: Product Red and Gap (1)

36. SM 2010 4a36 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.

37. SM 2010 4a37 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.

38. SM 2010 4a38 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.