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A) Corporate Governance

Corporate governance represents the framework that guides business decisions, ensuring companies are governed in the best interests of stakeholders. It establishes systems and processes for directing and overseeing companies to maximize long-term shareholder value through transparency and accountability. The main actors in corporate governance are the CEO, board of directors, shareholders, and other stakeholders like employees and creditors. Objectives include building trust and enhancing shareholder value while protecting other stakeholder interests through improved performance and accountability. Mechanisms and controls are designed to reduce inefficiencies and ethical issues.

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65 views

A) Corporate Governance

Corporate governance represents the framework that guides business decisions, ensuring companies are governed in the best interests of stakeholders. It establishes systems and processes for directing and overseeing companies to maximize long-term shareholder value through transparency and accountability. The main actors in corporate governance are the CEO, board of directors, shareholders, and other stakeholders like employees and creditors. Objectives include building trust and enhancing shareholder value while protecting other stakeholder interests through improved performance and accountability. Mechanisms and controls are designed to reduce inefficiencies and ethical issues.

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nicks012345
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We take content rights seriously. If you suspect this is your content, claim it here.
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a) CORPORATE GOVERNANCE

Corporate governance represents the value framework, the ethical framework and the moral
framework under which business decisions are taken. Corporate Governance may be defined
as a set of systems, processes and principles which make sure that a company is governed in
the best interest of all stakeholders. It is the system by which companies are directed and
controlled. It make sure the commitment of the board in operate the company in a
transparence manner for maximizing long-term value of the company for its shareholders. It
is about promoting corporate sufficiency, transparence and accountability. In other words,
‘good corporate governance’ is nothing but ‘good business’.

Corporate Governance refers to the relationship that exists between the different stakeholders
for an organization, and defining the direction and performance of an organization or a
corporate firm.

The following bodies are the main actors in Corporate Governance.

1. The Chief Executive Officer, i.e. the top person in the organization & the top
management of the organization.

2. The board of directors

3. The shareholders

The other actors who influence governance in corporations or firms are the employees,
suppliers, customers, creditors and the community i.e. all the stake holders for the
organization. A corporation can be defined as an instrument or a body by means of which
capital is acquired, used for investing in assets producing goods and services, and their
distribution

Objectives of Corporate Governance

 To build up an environment of trust and confidence amongst those having competing


and conflicting interest.

 To enhance the shareholders‟ value and protect the interest of other stakeholders by
enhancing the corporate performance and accountability.

Mechanism and Control for Corporate Governance

The mechanism and controls are designed to reduce the inefficiencies that arise from moral
incongruities and adverse selection. Ethical diversion is a very important issue for Corporate
Governance, while designing mechanism and control. The issues could be:

 Monitoring the Role/effectiveness of the Board of Directors.

 Remuneration of the Board Members and other employees in the company.


 Responsibilities and accountability for Audit Committees- financial reporting process,
monitoring the choice of accounting policies and principles, monitoring internal
control process and policy decisions for hiring and performance of the external
auditors.

 Issues and concerns of Government Regulations

 Understand the strategic issues of the competition

 Management labour market and concerns of control mechanisms.

b) PORTER'S 5 FORCE MODEL

Originally developed by Harvard Business School's Michael E. Porter in 1979, the


five forces model looks at five specific factors that help determine whether a business
can be profitable, based on other businesses in the industry. "Understanding the
competitive forces, and their underlying causes, reveals the roots of an industry's
current profitability while providing a framework for anticipating and influencing
competition (and profitability) over time," Porter wrote in a Harvard Business Review
article. "A healthy industry structure should be as much a competitive concern to
strategists as their company’s own position." According to Porter, the origin of
profitability is identical regardless of industry. In that light, industry structure is what
ultimately drives competition and profitability —not whether an industry produces a
product or service, is emerging or mature, high-tech or low-tech, regulated or
unregulated. "If the forces are intense, as they are in such industries as airlines,
textiles, and hotels, almost no company earns attractive returns on investment," Porter
wrote. "If the forces are benign, as they are in industries such as software, soft drinks,
and toiletries, many companies are profitable."
Understanding the Five Forces
Porter regarded understanding both the competitive forces and the overall industry
structure as crucial for effective strategic decision-making. In Porter's model, the five
forces that shape industry competition are:
1. Competitive rivalry. This force examines how intense the competition currently
is in the marketplace, which is determined by the number of existing competitors
and what each can do. Rivalry competition is high when there are just a few
businesses equally selling a product or service, when the industry is growing and
when consumers can easily switch to a competitor offering for little cost. When
rivalry competition is high, advertising and price wars can ensue, which can hurt a
business's bottom line. Rivalry is quantitatively measured by the Concentration
Ratio (CR), which is the percentage of market share owned by the four largest
firms in an industry.
2. Bargaining power of suppliers. This force analyzes how much power a
business's supplier has and how much control it has over the potential to raise its
prices, which, in turn, would lower a business's profitability. In addition, it looks
at the number of suppliers available: The fewer there are, the more power they
have. Businesses are in a better position when there are a multitude of suppliers.
Sources of supplier power also include the switching costs of firms in the industry,
the presence of available substitutes, and the supply purchase cost relative to
substitutes.
3. Bargaining power of customers. This force looks at the power of the consumer
to affect pricing and quality. Consumers have power when there aren't many of
them, but lots of sellers, as well as when it is easy to switch from one business's
products or services to another. Buying power is low when consumers purchase
products in small amounts and the seller's product is very different from any of its
competitors.
4. Threat of new entrants. This force examines how easy or difficult it is for
competitors to join the marketplace in the industry being examined. The easier it
is for a competitor to join the marketplace, the greater the risk of a business's
market share being depleted. Barriers to entry include absolute cost advantages,
access to inputs, economies of scale and well-recognized brands.
5. Threat of substitute products or services. This force studies how easy it is for
consumers to switch from a business's product or service to that of a competitor. It
looks at how many competitors there are, how their prices and quality compare to
the business being examined and how much of a profit those competitors are
earning, which would determine if they can lower their costs even more. The
threat of substitutes are informed by switching costs, both immediate and long-
term, as well as a buyer's inclination to change.
c) BALANCED SCORE CARD

A Balanced Scorecard is a performance management tool used by executives and


managers to manage the execution of organizational activities and to monitor the results
of actions. Fundamentally a balanced scorecard provides a summary level view of
organizational performance at a quick glance and includes key performance indicators
(KPIs) across four main areas or perspectives:

Financial Perspective: KPIs for productivity, revenue, growth, usage, and overall
shareholder value.
Customer Perspective: KPIs for customer acquisition, customer satisfaction rates, market
share, and overall brand strength.
Internal Process Perspective: KPIs for resource usage, inventory turnover rates, order
fulfillment, and quality control.
Learning / Growth Perspective: KPIs for employee retention, employee satisfaction, and
employee education, training, and development.

The balanced scorecard concept was originated by Drs. Robert Kaplan (Harvard Business
School) and David Norton as a framework for managing and measurement organizational
performance. The concept added strategic non-financial performance measures to
traditional financial metrics to provide executives and managers a more ‘balanced’ and
‘holistic’ view of organizational performance. Over time the balanced scorecard has
evolved from its early use as a simple performance measurement tool to a complete
strategic planning and management system. The latest version of the balanced scorecard
transforms an organization’s strategic plan from a passive document into the active
actions the organization needs to perform on a daily basis. Additionally, it provides a
framework that not only provides performance measurements, but helps planners identify
what should be performed and what should be measured.

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