LECTURE 1

GLOBAL STRATEGY: INTRODUCTION AND STRATEGIC PURPOSE

LECTURE OVERVIEW

1. What is strategy and why it matters?

2. What is competitive advantage?

3. Understanding organisational mission, purpose and vision

4. The value paradox

5. Shareholder value versus stakeholder value

6. Corporate social responsibility

7. Strategic CSR and shared value

WHAT IS STRATEGY?
Strategy is defined as: “a course of action for achieving an organisation’s purpose” (De Wit and
Meyer, 2014)

Strategic purpose means : “the reasons for which organisations exist… The perceptions the
managers have of their organisation’s purpose will guide the strategy process and influence the
strategy content” (Bartlett and Ghoshall, 1994; Campbell and Tawadey, 1990)

WHAT IS COMPETITIVE ADVANTAGE?

Carmen explains competitive advantage

https://sway.office.com/HKxHtikPMzNdv34n#content=aC3sMTRSG103XW

1 - Click the play button

The ultimate objective of the strategic management process is to enable a firm to choose and
implement a strategy that generates a competitive advantage.

A firm has a competitive advantage when it is able to create more economic value than rival firms.

Economic value is simply the difference between the perceived benefits gained by a customer that
purchases a firm’s products or services and the full economic cost of these products or services.
 2 - Barney & Hesterly (2014, 31) Types of competitive advantage - click to expand

Now that you are familiar with the key definitions of strategy and competitive advantage, please
watch the two videos below for how competitive advantage works in practice at Amazon and
Eastman.

3 - Amazon's Competitive Advantage

4 - Sustainability as competitive advantage

STRATEGIC PURPOSE
Corporate mission
Most corporate mission statements are built around four main elements (Hill and Jones, 2001; De
Wit and Meyer, 2014)

1. Organisational Purpose – purpose (‘what we are here for’) is at the heart of mission:
perception of purpose shapes both strategy process and content (Ghoshal, 1994)

2. Organisational Beliefs – ‘where we are and what needs to be done’ - assumptions re:
environments and trajectories for success; the ‘possible and feasible’; Beliefs, or
‘organisational ideology’ or dominant logic should be widely shared (Prahalad and Bettis,
1986)
 3. Organisational Values – ‘what is worthwhile, ethical and moral’ – what should be done and
how, and what activities should be avoided; Shared, values become part of the
‘organisational culture’ and impact on strategic direction – deeper than beliefs

4. Business Definition – ‘the business that we are in’ - a delineating definition; Boundaries of
activity: a guiding principle that helps draw the distinction between opportunities and
diversions

Corporate vision
‘...A vision articulates a view of a realistic, credible, attractive future for the organisation, a condition
that is better in some important ways than what now exists'. (Bennis and Nanus, 1986)

• Vision may help to point the way ahead for organisations

• Vision needs to be distinguished from purpose:

- Vision: A challenging and imaginative picture of the future of the organisation

- Purpose: The long-term, specific strategic direction of the organisation

Why vision?

• Reasons for developing vision:In competing for business and resources, most organisations
will benefit from a vision that articulates where they wish to be

• Stimulates development of mission and objectives

• Explores new strategic opportunities

• Extrapolating the current picture unlikely to be sufficient for strategy development

• Challenge for management

• Key point: there is no ‘strategic formula’ for developing a vision

To see how vision works in practice, watch the video below that not only details Apple's vision,
but does it in a way typical to the company itself

5 - Apple - Perspective

From vision to mission and to goals and objectives

Carmen explains the distinctions between vision, mission, objectives, and their strategic
importance
 https://sway.office.com/HKxHtikPMzNdv34n#content=DjaK0oKryC0Rfx

6 - Click the play button

• There is some confusion in this area – no absolute rules

• Vision: a challenging and imaginative picture of the future role of an organisation

• Mission: outlines the broad general directions that an organisation should and will follow,
summarising the reasoning

• Objectives: take the generalities of the mission and turn them into more specific
commitments

THE VALUE PARADOX

Carmen explains the value paradox - the theory and examples. Read through the detailed
information that follows on the shareholder and stakeholder value perspectives as you listen to
this lecture section.

https://sway.office.com/HKxHtikPMzNdv34n#content=7Om8kav8l44iDH

7 - Click the play button

 8 - Shareholders VS Stakeholders - - click to expand

“The social responsibility of business is to increase its profits”. (Milton Friedman, New York Times, 13
September 1970)

“A business that makes nothing but money is a poor kind of business”. (Henry Ford, 1903)

Stakeholders can be divided into internal stakeholders (e.g. managers and employees) and
external stakeholders.

External stakeholders are of 4 types:

a. Economic (e.g. suppliers; shareholders, banks)

b. Social/political (e.g. government agencies)

c. Technological (e.g. standards agencies)

d. Community (e.g. local residents)

SHAREHOLDER VALUE
Perspective - driven by classical and neo-classical economics (Smith, Ricardo, Friedman) –
‘embracing greed’

Premise – corporations should operate to create value solely for those who invest risk capital (i.e.,
owners)

Implication – executives and managers must pursue shareholders' interests solely (above all –
eschewing their own) – appropriate control and monitoring methods are required

Focus - the corporation must recognise the interests of stakeholders (in order to manage,
circumvent or negate these) but has no obligation to serve them

Motivation - profit motivation is the sole basis for calculation and strategic planning/actions

Responsibilities – shareholder only - stakeholders, the environment, communities etc. are the
domain of government and individuals

STAKEHOLDER VALUE
Perspective - driven by conflict and Marxist analyses

Premise – workers, communities, labour organisations, governments, consumers, suppliers etc. all
play a role in generating corporate profits – all should share in the outcomes

Implications
 • shareholders only input one ingredient to the mix and have no strong moral claim on
entirety of profits,

• a corporation is a coalition of interconnected interests with a shared stake in generating

common benefits

• claims on benefits and outputs must be balanced or reconciled

Responsibilities - management has an obligation to serve the interests of all constituents and
contributors to the corporate venture. This travels beyond direct (primary) participants to include
parties affected by corporate activity (secondary stakeholders - compensation for interference)
(Langtry, 1994)

Please listen to the discussion from the Aspen Institute about CSR and financial metrics. You should
also have a close look at this comparison of the two models (click to expand)

9 - The Aspen Institute about CSR and financial metrics.

10 - Stakeholders VS Shareholders - click to expand

(adapted from: Johnson et al., 2011)

STAKEHOLDER MAPPING
Stakeholder mapping identifies stakeholders' expectations and power, and helps to establish
priorities.

Key questions for stakeholder mapping:

1. What interest has each stakeholder in influencing the issue? What power has each
stakeholder to influence the issue
 2. Determining purpose and strategy – whose expectations need to be prioritised?

3. Who are the key blockers and facilitators of strategy? Is it desirable to try to reposition
certain stakeholders?

4. Can the level of interest or power of key stakeholders be maintained?

5. Will stakeholder positions shift according to the issue/strategy being considered?

Internal Stakeholders:

• Hierarchy

• Influence (e.g. control of access to senior people)

• Control of resources (e.g. strategic products)

• Possession of knowledge and skills; Control of finance and staff

• Control of the environment (e.g. negotiation skills)

• Involvement in implementation

External Stakeholders:

• Control of resources (e.g. funding)

• Possession of knowledge (e.g. distribution, outsourcing)

• Through internal links and influence

Carmen explains stakeholder mapping: examples and relevance

https://sway.office.com/HKxHtikPMzNdv34n#content=FyBoJD5IEF5MgV

11 - Click the play button

 12 - Click to expand. Source: Adapted from A. Mendelow, Proceedings of the Second International Conference on
Information Sys tems, Cambridge, MA, 1991.

CORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility (CSR) is the commitment by organisations to ‘behave ethically and
contribute to economic development while improving the quality of life of the workforce and their
families as well as the local community and society at large’.

Have a close look at the two lists below of external and internal aspects of CSR. How many of
these aspects do you think organisations should be responsible for? All? None? Some?

13 - External aspects of CSR - click to expand

 14 - Internal aspects of CSR - click to expand

Watch the video below to find out more about LuminAid, a company that designs an inflatable
solar lantern that could pack flat to be cost-effectively distributed after disasters. The whole
company is built around this one central mission -- basically, around their CSR.

15 - LuminAID

STRATEGIC CSR & SHARED VALUE

Carmen explains how CSR can be done strategically, according to Porter & Kramer (2006).

https://sway.office.com/HKxHtikPMzNdv34n#content=OYOGcvCjisKtu0

16 - Click the play button

Watch the following Ted Talk detailing the business benefits of doing good, and then listen to
Michael Porter explaining his research into shared value as strategy.

17 - TED Talk: The business benefits of doing good

 18 - Michael Porter talking about shared value as corporate strategy

WANT TO KNOW MORE?

Henry Stuart Talks are carefully curated collections of lectures on Business and Manageme nt topics,
The lecturers are leading world experts and practitioners, including Nobel Laureates, drawn from
academia, research institutes, commerce, industry, the professions and government.

If you want to know more about CSR and its role and importance in a global world, click the link
below to open the talk on an external site. The talk is given by Prof. Andrew McAuley, Pro Vice
Chancellor (Academic) at Southern Cross University, Australia

Also listen to your textbook authors introduce the concept of strategy below.

Click to open: Globalization and corporate social responsibility

19 - Your textbook authors introduce the concept of strategy

YOUR WEEKLY TASKS

TASK 1: PREPARE

TASK 2: DISCUSS

TASK 3: REFLECT

TASK 1: PREPARE

On Moodle there are compulsory readings for this week's tutorials, and essential materials for your
assessment preparation. We expect you to have read all the materials before your tutorials. You
can access them from the MMU library OR in PDF format on Moodle.

Prepare the recommended reading and tutorial slides for the on-campus tutorials. Your tutor will
facilitate discussions to develop the concepts introduced in the lecture and develop the topic, as well
as focus on case studies. In assessment clinics we will help consolidate the week's topic for the
assessment. Please check your timetable for sessions.

TASK 2: DISCUSS

Synthesizing the key takeways of this week's topic, answer the following question (200 words) on
Moodle in the Microsoft Form provided. Your answers are can only be seen by the tutors. We
recommend saving your answers via email as well, as they can be used in preparation for your exam.

TASK 3: REFLECT

Reflect on your learning this week by completing the short survey on Moodle. This will enable tutors
to make adjustments to further sessions based on your feedback. If most of you feel like we need to
return to a particular topic, we will accommodate this in our assessment clinics. Your answers are
anonymous.

Your tutor will monitor your engagement with the tasks and their completion, and will offer
feedback on your contributions.
RECOMMENDED READING

This lecture is also available with captions for the audio recordings.

Click this link to access: GS LECTURE 1 PLAYLIST

Whittington, R., Regnér, P., Johnson, G., Angwin, D. and Scholes, K., 2020. Exploring Strategy: Text
and Cases. Pearson.

Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: Theory & cases: An
integrated approach. Cengage Learning.

Barney, J.B. and Hesterly, W.S., 2015. Strategic management and competitive advantage. Global
Edition. New Jersey: Pearson Education.

Caroll, A.B. (1993) Business and Society: Ethics and Stakeholder Management, South-Western
Publishing

Clarke, T. (1998) The Stakeholder corporation: A Business Philosophy for the Information Age, Long
Range Planning

Copeland, T., Koller, T. and Murrin, J. (1995), Valuation: Measuring and Managing the Value of
Companies, Wiley

De Witt and Meyer (2010), Strategy, process, content, context. Fourth Edition

Donaldson, L. (1990), The Ethereal Hand: Organisational Economics and Management Theory,
Academy of Management Review

Freeman, R. E. (1984) Strategic Management: A Stakeholder Approach, Pitman

Friedman, M. (1970), The Social Responsibility of a Business is to Increase its Profits, New York Times
Magazine

Johnson, G. (1987) Strategic Change and Management Process, Long Range Planning

Johnson, G. (1992) Managing Strategic Change: Strategy, culture and Action, Long Range Planning

Jonhson, G, Scholes, K. and Whittington, K. (2012) Fundamentals of Strategy, Rearson Education LTD

Langtry, B. (1994), Stakeholders and the Moral Responsibilities of Business, Business Ethics Quarterly

Mendelow, A. (1986), Proceedings of the Second International Conference on Information Systems,

Cambridge

Shein, E. (1997) Organisational Culture and Leadership, Jossey-Bass

NEXT WEEK: EXTERNAL ENVIRONMENT