basic concepts bus pol start mgmt student copy (1)
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CHAPTER 1Basic
Conceptsof BusinessPolicy &StrategicManagement
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BasicConcepts of Strategic Management
Globaliation!nternationaliation of mar"ets an#corporations
Global $%orl#%i#e mar"ets rat'er t'annational mar"ets
Electronic Commerce(se of t'e !nternet to con#uct businesstransactions
Basis for competition on a more strategicle)el rat'er t'an tra#itional focus on pro#uctfeatures an# costs
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Basic Concepts of Strategic Management
Electronic Commerce ** Tren#s
. Forcing company transformation. Market access & branding
changing disintermediation oftraditional distribution channels
. Balance of power shift toconsumer
. Competition changing
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Basic Concepts of Strategic Management
Electronic Commerce ** Tren#s
. Pace of business increasing.
Internet purchasing beyondtraditional boundaries. Knowledge key asset source of
competitie adantage
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Business Policy as !iscipline
"eed to deelop multi#disciplinaryunderstanding of Business
$ capstone course that introducesaccountants to marketing% marketersto operations% production managers tohuman resources% often referred as
Business Policy at that time Business policy came from the use of
planning techniues from managers
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Business Policy as !iscipline
'hen came long range planning% laterreplaced by 1trategic Planning% thenreplaced by 1trategic Managementwhich described the process ofstrategic decision making
Business Policy basically deals withdecisions regarding the future of anorgani2ation% taken at top leel afterealuating the company3s strengthsand weaknesses in relation to its
enironment o1-7
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Business Policy as !iscipline
Integrates knowledge and methods learnedin functional courses% i*e* production% 4nance%marketing% 56% etc*
!eelops # analytical skills and decision#
making capabilities of students through casestudies% industry speci4c study & data
Promotes Positie $ttitudes ethical aluesand healthy ways of thinking taking holisticiew of the internal as well as e7ternalstakeholders of an organi2ation
Business Policy tends to emphasise rational#
analytical aspect of strategic management1-8
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Characteristics of Business $ctiities
Continuing economic decision#makingactiity (entrepreneurial mind set% risk%uncertainty of return0
Managerial% social and legal processes(moral alues% socially & legallyresponsible0
Production of goods and serices (alueadded0
1ale or e7change of goods and serices
1atisfaction of human needs 1-9
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Functions of Businesses
1tart#up Phase Marketing (product% price% promotion%
physical distribution0
Production (operations8 plant location andlayout% plant building% production planning%repair & maintenance% uality control0
97pansion Phase
Finance (management of funds relatie toliuidity% pro4tability% solency & e.ciencyof operations0
5uman resources 1-10
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Meaning & "ature ofManagement
6esponsible for integrating resources(manpower% machine% material &method0 and mobili2ing resources%
increasing productiity% facilitateorgani2ational change% adaption%resolution of con-icts* 1uccess of
organi2ation depends on competenceand character of management
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Meaning & "ature ofManagement
+rgani2ational processes% design ofstructure% determination of goals%acuisition and allocation of resources%
installation of control and communicationsystem depends on management
Management is in-uence process tomake things happen* It is backed bypower% competence% knowledge andresources* It is multilateral
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Management
Comprises planning% organi2ing*1ta.ng% leading or directing%facilitating and controlling or
manipulating an organi2ation ore:ort for the purpose ofaccomplishing a goal
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Management Models
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Tra#itional Mo#ernManaging assets Managing resources &
capabilities
Focus on managingnumbers
Focus on creating alue
5ierarchical "etwork!ependent parts Independent parts
6eactie 6esponsie
Command and control 9mpowered employees
Blame culture 9ncouraging radical
ideas
6isk aerse 6isk taking
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1ailing 6ace; 1trategy9lements
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Acti)ity ElementPlace to go skills
!ecisions% tasks 1tructure
"orms% culture Core alues
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?hat is 1trategy
Intended strategy plan for action
9mergent strategy process
6eali2ed strategy # outcome
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St t i M t D fi d
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Strategic Management Defined
Set of managerial decisions andactions that determines the long-run
performance of a rm.
B i C t f St t i M t
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Basic Concepts of Strategic Management
+ P'ases of Strategic Management
@* Basic 4nancial planning (budgeting0A* Forecast#based planning (# years0
* 97ternally#oriented planning(Dresort3
retreat led by key members ofplanning sta: to deelop strategicplans for the company
E* 1trategic management# planning
interactie across leels& is nolonger top down8 internal ande7ternal consultants aailable toguide group strategy decisions
B i C t f St t i M t
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Basic Concepts of Strategic Management
Hig'ly Rate# Bene,ts
. Clearer sense of strategic ision(e7ecute current actiities to satisfye7isting market but must also adaptthese actiities to satisfy new &changing markets0
. 1harper focus on strategic importance(D4t3 between enironment & strategy%
structure & processes0. Improed understanding of changing
enironment
B i C t f St t i M t
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Basic Concepts of Strategic Management
-ot Al%ays a .ormal Process
. ?here is the organi2ation nowG(not where do we hope it is0
. If no changes are made% wherewill the organi2ation be in @%A% or@H yearsG
. ?hat speci4c actions shouldmanagement undertakeG
. ?hat are the risks and payo:sG
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A@
9+=J'I+" +F 1'6$'9
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Basic Concepts of Strategic Management
Basic Elements of the Strategicanagement !rocess
Environmental Scanning Defined
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Environmental Scanning Defined
Monitoring, evaluation, and
disseminating information fromexternal and internal environments to key people in the rm
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'he Macro 9nironment
'here are a number of commonapproaches for how the e7ternalfactors% which describe the macro
enironment% can be identi4ed ande7amined* 'hese factors indirectlya:ect the organi2ation but cannot be
controlled by it* +ne approach is theP91' analysis*
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'he Macro 9nironment
P91' (political% economic% social andtechnological0* +f the four categoriese7plored in the P91' analysis% the
company has the least control oereconomic factors*
'wo more factors% the enironmental
and legal factor% are de4ned withinthe P91'9= analysis (or P91'=9analysis0*
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'he Macro 9nironment
'he segmentation of the macroenironment according to the si7presented factors of the P91'9=
analysis is the starting point of theglobal enironmental analysis*
'he si7 enironmental factors of the
P91'9= analysis are the following; Political factors
'a7ation policy81-26
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'he Macro 9nironment
'raderegulations8
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'he Macro 9nironment
Customer liuidations*
Socio-cultural
$ge distribution8
9ducation leels8
Income leel8
Consumerism* !iet and nutrition8
Population growth8
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'he Macro 9nironment
=ife e7pectancies8
6eligion8
1ocial class8 97pectations of society about thebusiness*
echnological factors Internet8
9#commerce8
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'he Macro 9nironment
1ocial media*
=eel of $utomation
Environmental factors
Competitie adantage8
?aste disposal8
9nergy consumption8 Pollution monitoring*
!egal factors
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https://www.boundless.com/marketing/definition/mediahttps://www.boundless.com/marketing/definition/automationhttps://www.boundless.com/marketing/definition/automationhttps://www.boundless.com/marketing/definition/media -
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'he Macro 9nironment
Jnemployment law8
5ealth and safety8
Productsafety8
$dertisingregulations8
Product labeling labor laws*
Ecology
$:ects customer,s buying habits8 $:ects the production processof the 4rm*
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https://www.boundless.com/marketing/definition/producthttps://www.boundless.com/marketing/definition/advertisinghttps://www.boundless.com/marketing/definition/processhttps://www.boundless.com/marketing/definition/processhttps://www.boundless.com/marketing/definition/advertisinghttps://www.boundless.com/marketing/definition/product -
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'he Macro 9nironment
Potential supplies =abor supply8
uantity of labor aailable8
ualityof labor aailable8
Material suppliers8
!eliery delay8
=eel of competition to suppliers8
1ericeproider8
1pecial reuirements* 1-32
Basic Concepts of Strategic Management
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Basic Concepts of Strategic Management
Environmental
Variables
Environmental Scanning
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Environmental Scanning
S40T Analysis
. 1trengths ?eaknesses
. +pportunities # 'hreats
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Planning
9lements 9nironmental 1canning
Monitoring
$ssessing
'ools 1?+' Identi4cation
'op#down planning Bottom#up Planning
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Planning
'ools ision Based Planning
Issue Based Planning
1cenario Planning
+rganic Planning
Fie Forces $nalysis
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'op !own> Bottom JpPlanning
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Planning
Basic Planning Identify 4rm3s purpose (mission
statement0
Create general goals to accomplishmission
Identify speci4c action plans to
implement each strategy 9aluate and update the plan oer time
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Planning
ision#Based Planning 9stablish ision#mission
9stablish goals in line with ision and
mission Craft strategies
!eelop action plans for each strategy
!eelop roadmap showing mission%ision% goals% strategies and action plans
Monitor and ealuate implementation
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Planning
Issue based (
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Planning
1cenario Planning
Identify possible future scenarios broughtabout by e7ternal forces which might
in-uence the organi2ation !eelop hedge plans to address each changein a force* 5edge plans coer di:erentfuture organi2ational scenarios (best% worst
and ok>reasonable case0 which might arise asa result of each change* ?orst scenario urgesstrong motiation to change
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Planning
1cenario Planning Choose and implement best course of
action
9mploy alternatie strategy if likelihoodof chosen strategy is futile based onsignposts or indicators
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Planning
+rganic (self organi2ed0 Planning !etermines best practices% processes and
methods8 practical application in the workplace
1teps
Clarify and articulate organi2ation3s culture andalues through dialogues & storyboard techniues
!iscuss ob)ecties of the group for the 4rm
!etermine on#going basis the weaknesses of currentprocesses and recommend improement
6e-ect on how organi2ation will portray plans tostakeholders
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Planning
Porter3s Fie Forces $nalysis tool for understanding where power lies
in a business situation
helps you understand both the strengthof your current competitie position andthe strength of a position you,reconsidering moing into*
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Porter3s Fie Forces $nalysis
Fie Forces Supplier Po%er5
$ssess how easy it is for suppliers to drie
up prices (drien by the number of suppliersof each key input% the uniueness of theirproduct or serice% their strength and controloer you% the cost of switching from one toanother% etc*0
'he fewer the supplier choices and the moreyou need suppliers, help% the more powerfulyour suppliers are*
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Porter3s Fie Forces $nalysis
Fie Forces Buyer Po%er5
5ow easy it is for buyers to drie prices
down (drien by the number of buyers% theimportance of each indiidual buyer to yourbusiness% the cost to them of switching fromyour products and serices to those ofsomeone else% etc*0
If you deal with few% powerful buyers% thenthey are often able to dictate terms to you*
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Porter3s Fie Forces $nalysis
Fie Forces Competiti)e Ri)alry5
"umber and capability of your competitors*
If you hae many competitors% and they o:ereually attractie products and serices% thenyou,ll most likely hae little power in the situation%because suppliers and buyers will go elsewhere ifthey don,t get a good deal from you*
If no#one else can do what you do% then youcan often hae tremendous strength*
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Porter3s Fie Forces $nalysis
Fie Forces T'reat of Substitution5
$bility of your customers to 4nd a di:erent
way of doing what you do% i*e*% if you supplya uniue software product that automatesan important process% people may substituteby doing the process manually or byoutsourcing it*
If substitution is easy and substitution isiable% then this weakens your power*
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Porter3s Fie Forces $nalysis
Fie Forces T'reat of -e% Entry5
Power is also a:ected by the ability of
people to enter your market* If it costs little in time or money to enter your
market and compete e:ectiely% if there are feweconomies of scale in place% or if you hae littleprotection for your key technologies% then new
competitors can uickly enter your market andweaken your position*
If you hae strong and durable barriers to entry%then you can presere a faorable position andtake fair adantage of it*
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Corporate
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6esponsibilities of the Board
1etting corporate strategy% oeralldirection% mission or ision
5iring and 4ring C9+ and top
management
Controlling% monitoring or superisingtop management
6eiewing and approing use ofresources
Caring for shareholders3 interests1-51
l f h d i i
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6ole of the Board in 1trategic
Management
Monitor
9aluate and in-uence 97amine management3s proposal%
decisions and action8 agree or disagreewith them% gie adice and o:ersuggestions
Initiate and determine Can delineate corporation3s mission and
specify strategic options tomanagement
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9aluating
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Bene4ts of
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'rends in Corporate
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'rends in Corporate
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'rends in Corporate
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9thics
Code of moral principles*
1et standards of goodN and badN as
opposed to rightN and wrong*N
9thical behaior
?hat is accepted as good and right in
the conte7t of the goerning moral code*
9thical Behaior
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=aw% alues% and ethical behaior; =egal behaior is not necessarily ethical
behaior*
Personal alues help determine indiidualethical behaior*
'erminal alues (goals that we work towards
and iew as most desirable% i*e* Familysecurity; taking care of loed ones0
Instrumental alues (preferred methods of
behaior% i*e* honest% polite% and ambitious0
9thical Behaior
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Four iews of ethical behaior*
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Cultural issues in ethical behaior;
Cultural relatiism
9thical behaior is always determined by
cultural conte7t*
Cultural uniersalism
Behaior that is unacceptable in one3s home
enironment should not be acceptableanywhere else*
9thical Behaior
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Management - Chapter 3
63
'he e7tremes of cultural relatiism and ethicalimperialism in international business ethics*
Source: Developed from Thomas Donaldson, !al"es #n Tens#on: $th#%s &'a( from )ome,*
Harvard Business Review, vol+ ./eptemer-%toer 1996, pp+ 8-62+
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9thical Behaior
5ow international businesses can respect core or uniersalalues;
"espect for human dignity Create culture that alues employees% customers% and
suppliers*
Keep a safe workplace* Produce safe products and serices*
"espect for #asic rights Protect rights of employees% customers% and communities* $oid anything that threatening safety% health% education%
and liing standards*$e good citi%ens 1upport social institutions% including economic and
educational systems* ?ork with local goernment and institutions to protect
enironment*
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$n ethical dilemma occurs when choices%although haing potential for personaland>or organi2ational bene4t% may beconsidered unethical*
9thical dilemmas include; !iscrimination 1e7ual harassment Con-icts of interest Customer con4dence +rgani2ational resources
5ow do ethical dilemmas complicate the workplaceG
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5ow do ethical dilemmas complicate the workplaceG
9thical behaior can be rationali2ed by
conincing yourself that;
Behaior is not really illegal*
Behaior is really in eeryone3s best
interests*
"obody will eer 4nd out*
'he organi2ation will protectN you*
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Factors in-uencing ethical behaior
include;
'he person
Family in-uences% religious alues% personalstandards% and personal needs*
'he organi2ation
1uperisory behaior% peer group norms and
behaior% and policy statements and written rules*
'he enironment
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Factors in-uencing ethical managerial behaiorOthe person% organi2ation% and enironment*
5ow can high ethical standards be
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5ow can high ethical standards bemaintainedG
Checklist for dealing with ethical dilemmas1tep @* 6ecogni2e the ethical dilemma
1tep A;
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0
9thics training;1tructured programs that help
participants to understand ethical
aspects of decision making*5elps people incorporate high
ethical standards into daily life*
5elps people deal with ethicalissues under pressure*
5ow can high ethical standards be maintainedG
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1
?histleblowers
97pose misdeeds of others to;
Presere ethical standards
Protect against wasteful% harmful% or illegal acts
=aws protecting whistleblowers ary
5ow can high ethical standards be maintainedG
5ow can high ethical standards be
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5ow can high ethical standards bemaintainedG
Barriers to whistleblowing include; 1trict chain of command
1trong work group identities
$mbiguous priorities+rgani2ational methods for
oercoming whistleblowing barriers; 9thics sta: units who sere as ethics
adocates Moral uality circles
5ow can high ethical standards be
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3
5ow can high ethical standards bemaintainedG
9thical role models;
'op managers sere as ethical role models*
$ll managers can in-uence the ethical
behaior of people who work for and with
them*
97cessie pressure can foster unethical
behaior*
Managers should be realistic in setting
performance goals for others*
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Codes of ethics; Formal statement of an organi2ation3s alues
and ethical principles regarding how to behaein situations susceptible to the creation of
ethical dilemmas*$reas often coered by codes ofethics; Bribes and kickbacks Political contributions 5onesty of books or records Customer>supplier relationships Con4dentiality of corporate information
5ow can high ethical standards be maintainedG
1ocial 6esponsibility & 9thics in
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1ocial 6esponsibility & 9thics in1trategic Management
1ocial responsibility proposes that apriate corporation hasresponsibilities to society that e7tend
beyond making pro4t Friedman3s 'raditional iew of
6esponsibility
6esponsibility of business is to useresources and engage in actiitiesdesigned to increase pro4ts as long as itengages in open and free competition
without deception or fraud 1-75
Carroll3s Four 6esponsibilities of
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Carroll s Four 6esponsibilities of
Business
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!iscretionary
9thical
9conomic =egal
Social "es#onsi$ilities
Carroll3s Four 6esponsibilities of
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Carroll s Four 6esponsibilities of
Business
9conomic# produce goods and serices ofalue to society so that the 4rm may repay itscreditors and shareholders
=egal de4ned by goernments in lawsmanagement is e7pected to obey
9thical# follow generally held beliefs aboutbehaior in a society
!iscretionary# purely oluntary obligations acorporation assumes8 few people e7pect anorgani2ation to ful4ll discretionary
responsibilities 1-77
i l ibili
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1ocial 6esponsibility
1ustainability# can be broadened toinclude economic and social as wellas enironmental concerns
For a corporation to be sustainable(successful for longer period of time%it must satisfy all of its economic%
legal% ethical and discretionaryresponsibilities0
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Corporate 1ocial 6esponsibility
Beliefs that guide socially responsiblebusiness practices; People do their best with a balance of work
and family life* +rgani2ations perform best in healthy
communities* +rgani2ations gain by respecting the natural
enironment* +rgani2ations must be managed and led forlong#term success*
+rgani2ations must protect theirreputations*
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Corporate 1ocial 6esponsibility
$rguments againstsocialresponsibility; 6educed business
pro4ts 5igher business
costs
!ilution of business
purpose'oo much socialpower for business
=ack of publicaccountability
$rguments in faor
of socialresponsibility; $dds long#run
pro4ts
Improed publicimage
$oids moregoernment
regulation Businesses hae
resources andethical obligation
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Four strategies of corporate social responsibilityOfrom obstructionist to proactie behaior*
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82
5ow do organi2ations and goernments work together in societyG
5ow goernment in-uences
organi2ations;
Common areas of goernment
regulation of business a:airs; +ccupational safety and health
Fair labor practices
Consumer protection 9nironmental protection
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83
5ow do organi2ations and goernments work together in societyG
5ow organi2ations in-uence goernments;
Personal contacts and networks
Public relations campaigns
=obbying
Political action committees
1ometimes by illegal acts% such as bribery or
illegal 4nancial contributions to political
campaigns
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8
Centrality of ethics and social responsibility inleadership and the managerial role*
Strategy Formulation
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1-86
&evelopment of long-range plans fore'ective management ofopportunities and threats in lightof corporate strengths and(eaknesses
9lements of Formulation
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9lements of Formulation1tage
!eeloping strategic ision andmission
1etting measurable ob)ecties
!etermining strategic posture
9stablishing policies
Implementing rules and procedures
Matching resources and capabilities
1-87
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!eeloping 1trategic ision and Mission
ision# concretely describes how acompany sees itself in the future $d)usted t more medium term period (#
years0 1teps
isuali2e what the organi2ation wants to be(creates dreams0
Inspire people
Proide focus (paints future directions suchthat all resources can be utili2ed e.ciently
& e:ectiely0 1-88
!eeloping 1trategic ision and
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!eeloping 1trategic ision and
Mission
9:ectie isioning !ecision makers start by creatiely
stating desired outcome dictated bydistribution of resources supported bymanagerial capabilities
$rises out of the need for the business tooperate in more global and market
oriented enironment 9.cient isioning
Jtili2ing aailable resources and
capabilities o:ered by each function>1-89
l i 1 i i i d i i
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!eeloping 1trategic ision and Mission
"ormally emanates from topmanagement based on oeriew of4rm3s situation
'asks that would help accomplishision In)ect sense of purpose into 4rm3s
actiities Proide long#term discretion
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!eeloping 1trategic ision and Mission
1hould be speci4c% time#bound anddistinct to the organi2ation
Better stated in present tense#
connotes eery action performedtoday is a step towards reali2ation ofthe ision
Must contain simple but powerfulwords that should inspire andchallenge eery member of the
organi2ation1-91
!eeloping 1trategic ision and
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p g g
Mission
Considerations in reising ision'ime (depends on the business of the
organi2ation8 use term rather than
speci4c measure of time0 Cost
Company3s performance (growth of thecompany from formation to present0
?orkforce competencies (deelopmentof di:erent e7pertise8 going upcorporate ladder0
1-92
Strategy Formulation
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1-93
Mission Statement 6e-ects management3s ision of what
the 4rm seeks to do and become Proides more details about the
organi2ational goals
$nswers; Dwhat is our business38 Dwhydo we e7ist3
reason for organi2ation
Mission 1tatement
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Mission 1tatement
Promotes shared e7pectations Communicates public image
1hould last at least @HH years while
goals and strategies can be changedmany times within @HH years
6e-ects management ision of what
the 4rm seeks to do and become
1-94
Bene4ts of ?riting 1trategic
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g gIntent
Compel management and employeesto hae sense of direction andpurpose
!ries strategic decision making andresource allocations
+bligates seeking of signi4cant
performance improements to attainob)ecties
1-95
1etting Measurable
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g+b)ecties
?hat one hopes to accomplish 1M$6' (speci4c% measurable%
attainable% realistic% time bound0 andC+? (communicated% owned% written0
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g+b)ecties
Business goals considered long term includenew product% growing annual reenue anddeeloping comprehensie marketing andpublic relations strategy
+b)ecties closer to company3s mission andision8 market position% new market%product> serice mi78 technology8 humanresources8 image8 growth> diersi4cation8pro4tability
Best is to compare with performance ofcompetitors
1-97
!etermining 1trategic Posture(long#
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g g g
term ision0
?hat business are we in nowG
?hat business do we want to beG
?hat will our customers want in the
futureG
?hat are the e7pectations of ourstakeholdersG
?ho will be our future competitors>suppliersG PartnersG
1-98
!etermining 1trategic Posture(long#
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g g g
term ision0
?hat should our competitie scopebeG
5ow will technology impact our
industryG ?hat enironmental scenarios are
possibleG
1-99
9stablishing Policies
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9stablishing Policies ?ritten guide that proides clear%
concise and straight to the pointdirections for people within theorgani2ation
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9stablishing Policies
1anctions if deiated 1hould be clearly communicated
Basis of performance
1hould not be too constraining andconfusing that limit creatiity indecision#making
Changes e7pected & necessary Manifested in decreasing stakeholders3
wealth and income
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Implementing 6ules and Procedures
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Implementing 6ules and Procedures
6ules describe how a speci4c actionis to be performed to ensuremanagement and employees ful4ll
their roles toward meetingcompany3s e7pectations
Procedures de4nes series steps in
achieing speci4c task 6ules and procedures should not
contradict% in case of con-ict policy
will preail1-102
Matching 6esources &
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Capabilities
Match resources and capabilities withopportunities & risks that arise ine7ternal enironment
Process of matching that determinesattractieness of the industry(ownership of resources0 & 4rm3scompetitie adantage (deelopmentof resources aailable to the 4rm0
Benchmarking ob)ectiely assess