Managing the Organisation

in the Strategic Context

Prof. Dr. Ewout van der Schaft
2/3-11-2024, Weekend 1
2-11-2024/3-11-2024:
Course introduction, ice breaker, Basic concepts of strategy, introduction to the
strategy process, introduction to research methods, Environmental Analysis, PESTEL
Environmental and Resource analysis; Porter’s Five Forces Model.

Literature: See appendix textbook

Introduction to Case for Assignment 1: Starbucks

16-11-2024/17-11-2024:
Business and Corporate Strategy. Corporate Strategy and Diversification International
Strategy. Innovation, Entrepreneurship and M&A’s. Evaluating Strategies. Leadership
and Change.

Literature: See appendix textbook

Introduction to the Final Assignment

Elevator Pitch: Get to know each other better..
• You have 1 minute to reveal one personal matter, of which your
classmates could be surprised about:

• Something embarrassing

• A personal achievement

• A fun fact

• Something you are proud of

• Anything...as long as it is not related to husbands, wives and

children…yes, we know they are all lovely
Rules of the Game
Informal atmosphere
• First name base
• Speak up and take initiative
• No smartphone addictive behaviour

Together
• Share experience
• Think critically
• Have a laugh
• .. and who knows, we’ll learn something
Itinerary
• What is strategy?
• Vision, Mission, Values
• Analysis of quantitative and qualitative information
• Strategy development: resource- and environmental analysis
• Strategic choices and options
• Strategic decision making
• Strategic implementation
• Strategic presentation and reporting

* Illustrated with slides, discussions, video’s, simulations, case studies, etc..

Literature, Background and References
• WWW: professional websites, academic websites,
youtube, corporate websites, blogs, presentations,
etc..
• Literature Textbook: Strategic Management; A
Competetive Advantage Approach.
• Other Sources: Exploring Strategy + Michael
Porter, Malcom Gladwell, Henry Mintzberg, Cynthia
Montgomery, Robert Grant, etc..
• Our Academic, Research and Practical Experience
Grading
The grading will consist of 2 parts (total 100%):

• Assignment 1. Your 1st Assessment. 30% Group (PPT)

• Assignment 2. Applied Research in your own Company. 70%

Individual (Paper)
Assignment 1
Assignment 2
Assignment 2:
Prepare a strategic plan for your organisation, or an organisation of your choice. In case you wish to select a company which is not
your own, please consult your chosen company with the SMO407 module leader. The aim of the paper is to identify and discuss a core
strategic issue that your organisation faces at the present time.

The 2500 word (+/- 10%) report should contain the following paragraphs:
• “Introduction”: this needs to include the problem definition and a description of the background of the organization in question.
• “Analysis and Evaluation”: You should analyse the strategic issue defined in the first step. This analysis should involve empirical
evidence (regardless of whether this evidence is of a more “qualitative” or a more “quantitative” nature). In this step, you should make
use of analytical frameworks and/or methods discussed in the course and/or in the established strategy literature. The student should
use as a minimum 2 of the following strategic frameworks: Porter’s 5 Forces, PESTEL, Value Chain Analysis, Strategic Clock and/or
Strategic Capabilities (VRIN/VRIO)
• “Recommendation”: On the basis of the first two steps, you should then provide one or several recommendations for how to
address / resolve the issue that you have identified, and evaluate these recommendations. It is important that the solutions you come
up with are realistic and achievable. Finally, you should outline which practical steps you / others in your organisation would have to
take in order to put your recommendation(s) into practice.
Business Strategy

• Introducing strategy
What is Strategy?

According to Google there are 164 million

answers to this question!
Definitions of Strategy

Let’s try together….

https://www.schaeffler.com/en/strategy/
Definitions of Strategy

Sources: A.D. Chandler, Strategy and Structure: Chapters in the History of American Enterprise, MIT Press, 1963, p. 13; M.E. Porter, ‘What is strategy?’,
Harvard Business Review, November–December 1996, p. 60; P.F. Drucker, ‘The theory of business’, Harvard Business Review, September–October
1994, pp. 95–106; H. Mintzberg, Tracking Strategies: Towards a General Theory, Oxford University Press, 2007, p. 3.
Strategic decisions

Source: From G. Johnson, K. Scholes and R. Whittington. Exploring Corporate Strategy, 8th edn, Pearson Education 2008.
Three horizons for strategy (1 of 2)
• Horizon 1:
Current core activities – extend and defend these activities.

• Horizon 2:
Develop emerging activities – to generate new sources of growth and/or profit.

• Horizon 3:
Create viable strategic options for the future – higher risk activities that may
take years to generate growth/profits.
Three horizons for strategy (2 of 2)

Note: ‘profit’ on the vertical axis can be replaced by non-profit objectives; ‘business’ can refer to any set of activities; ‘time’ can refer to a varying number of years.
Source: M. Baghai, S. Coley and D. White, The Alchemy of Growth, Texere Publishers, 2000. Figure 1.1, p. 5.
Fundamentals of Strategy (6th edition)

• Strategy Examples
Discussion: Strategy issue
Layers of the business environment
Mission statements
A mission statement aims to provide employees and stakeholders
with clarity about what the organisation is fundamentally there to do.

• ‘What business are we in?’

• ‘What would be lost if the organisation did not exist?’
• ‘How do we make a difference?’
Mission
• A mission statement describes the purpose of the company, why it
exists, what it does and for whom

• The mission reflects the what it needs to be to realise its vision

• The mission should focus on here and now

Mission Example –Guess who?

Making modern life possible. Every day and across the

globe, XYZ’s products and services contribute to
much of what we all expect of a well-functioning
society.
 Volvo Mission 2021

Volvo group mission - making modern life possible

Making modern life possible Every day and across
the globe, the Volvo Group’s products and services
contribute to much of what we all expect of a well-
functioning society.
Volvo Mission 2024
Vision statements
A vision statement is concerned with the future the organisation
seeks to create.

• ‘What do we want to achieve?’

• ‘If we were here in twenty years what do we want to have created or
achieved?’
Vision
• Vision statements lay out the most important goals for a company. With a
strong vision statement, employees are all on the same page

• Vision statements are dynamic and can change over time. As a company
grows, its objectives and goals may change. Vision statements need to
be updated when visionary goals are met
Corporate Vision Examples
• Amazon: “To be the world’s most customer-centric company.”

• Walmart: “To become the worldwide leader of all retailing.”

• Nike: “To bring inspiration and innovation to every athlete in the world.”

• IKEA: “Create better everyday lives for as many people as possible.”

• Unilever: "To make sustainable living commonplace."

 Case 1: Vision?
About CenTrade (www.centrade.cz):

CenTrade provides complete, universal, secure, and robust B2B environment to help companies enter into
the age of electronic business. The unique knowledge, experience, and capabilities of ČESKÝ TELECOM,
Citibank, and PricewaterhouseCoopers - contributed significantly to its development. The comprehensive
solution is based on state of the art technologies including SAP, CommerceOne, and EDI, which have been
proven worldwide. The objective of CenTrade is to offer efficient and transparent environment for daily
electronic management of business processes related to purchasing, ordering, invoicing, payment, and
logistics.

CenTrade announced its first electronic business transaction and the first electronic auctions. After three
months of pilot operations, CenTrade began commercial trading on the live platform;We are proud to
announce that Alcatel Czech, s.r.o. has signed up and is joining CenTrade as the first customer, said Ewout
van der Schaft, CenTrade Commercial Director.
Case 2: Vision
Corporate Vision Example
Statement of values
Statements of corporate values communicate the underlying and
enduring core ‘principles’ that guide an organisation’s strategy and
define the way that the organisation should operate.

NB These values do NOT change with circumstances.

Statement of Corporate Values
• A statement of corporate values should communicate the underlying
and enduring core ‘principles’ that guide an organisation’s strategy
and define the way that the organisation should operate.

• Such core values should remain intact whatever the circumstances

and constraints faced by the organisation.
Values XJTLU

DRIFT:
• Diversity
• Regulations
• Innovation
• Freedom
• Trust

Can we do better?
Value Led Company/Brand

www.benjerry.com/about-us
Which Company’s
Values?
This Company’s
Values!
The Strategy Focused Organisation
(Kaplan, Norton)
Statement of objectives
Objectives are statements of specific outcomes that are to be
achieved.
• Often stated in financial terms (e.g. Profit).
• May also be market-based objectives (e.g. Market Share).
• May emphasise basis of competitive advantage.
• ‘Triple Bottom Line’ – economic, social and environmental
objectives.
Strategy statements
Strategy statements should have three main themes:
• Fundamental goals that the organisation seeks, which reflect the
stated mission, vision and objectives.
• The scope or domain of the organisation’s activities.
• The particular advantages or capabilities it has to deliver all of
these.
Levels of strategy (1 of 2)
• Corporate-level strategy is concerned with the overall scope of an
organisation and how value is added to the constituent business units.

• Business-level strategy is concerned with the way a business seeks

to compete successfully in its particular market.

• Functional strategy is concerned with how different parts of the

organisation deliver the strategy effectively in terms of managing
resources, processes and people.
Levels of strategy (2 of 2)

Diversifying from the organisation’s original

Corporate- activities into other activities (e.g. Tesla selling
level batteries for home use.)
strategy

Marketing and product improvement strategies

Business-level (e.g. Developing a lower cost, volume car for
strategy Tesla.)

Tesla’s functional strategies

Functional strategies are geared to meeting its
investment needs and raising
finance.
Corporate goals Maximize shareholder wealth

Business unit objectives 12% revenue growth

Marketing objectives Increase product A’s market share by 2 points

Sales department objectives Achieve sales revenue of $210 million in prod. A

Sales district objective Achieve sales revenue of $10.5 million in product A

Salesperson objective Achieve sales revenues of $1.2 million in product A

Major account objective Achieve sales revenues of $95,000 in product A

Hierarchy of Objectives
Environmental Analysis
57
Layers of the business environment
Analysing the macro-environment
The PESTEL framework (1 of 2)
PESTEL analysis highlights six environmental factors in particular:
political, economic, social, technological, ecological and legal.

Organisations need to consider:

• The market environment (e.g. suppliers, customers and competitors).
• The non-market environment (e.g. NGOs, Government, media and
campaign groups).
The PESTEL framework (2 of 2)
The PESTEL framework categorises environmental factors into six key
types:
Political Economic
Social Technological
Ecological Legal

PESTEL helps to provide a list of potentially important issues influencing

strategy. It is important to assess the impact of each factor.
Political factors (1 of 2)
Political factors include:
• The role of the state e.g. as an owner, customer or supplier of
businesses.
• Government policies.
• Taxation changes.
• Foreign trade regulations.
• Political risk in foreign markets.
• Changes in trade blocks (e.g. BREXIT).
• Exposure to civil society organisations
(e.g. lobbyists, campaign groups, social media).
Political factors (2 of 2)
Economic factors
Economic factors include:
• Business cycles.

• Interest rates.

• Personal disposable income.

• Exchange rates.

• Unemployment rates.

• Differential growth rates around the world.

Social factors
Social factors include:
• Changing cultures and demographics (e.g. ageing population in
Western societies).
• Income distribution.
• Lifestyle changes.
• Consumerism.
• Changes in culture and fashion.
• Social networks within an organisational field
(e.g. with regulators, campaign groups, trade unions).
Technological factors (1 of 2)
Technological factors include:

New discoveries and technology developments.

Examples include developments on the internet, nano-technology

or the rise of new composite materials.
Technological factors (2 of 2)
There are five primary indicators of innovative activity:

• Research and development budgets.

• Patenting activity.

• Citation analysis.

• New product announcements.

• Media coverage.
Ecological factors (1 of 2)
Ecological factors: This refers to ‘green’ or environmental issues,
such as pollution, waste and climate change.

Examples are environmental protection regulations, energy

problems, global warming, waste disposal and recycling.
Ecological factors (2 of 2)
Three sorts of ecological challenges that organisations may need to meet:
• Direct pollution obligations– minimising the production of pollutants;
cleaning up and disposing of waste.
• Product stewardship – managing ecological issues throughout the
organisation’s entire value chain and the whole life cycle of the firm’s
products.
• Sustainable development – whether the product or service can be
produced indefinitely into the future.
Legal factors
Legal factors include:

• Labour, environmental and consumer regulations.

• Taxation and reporting requirements.

• Rules on ownership.

• Competition regulations.

• Regulation of corporate governance.

Using the PESTEL framework
• Apply selectively – identify specific factors which impact on the industry,
market and organisation in question.
• Identify factors which are important currently but also consider which will
become more important in the next few years.
• Use data to support the points and analyse trends using up-to-date
information.
• Identify opportunities and threats – the main point of the exercise.
PESTEL opportunities and threats for the oil industry
Opportunities and threats
The critical issue in undertaking environmental analysis is the
implications that are drawn from this understanding in guiding
strategic decisions and choices.

Identifying opportunities and threats is extremely valuable when

thinking about strategic choices.

Opportunities and threats form one half of the SWOT analysis that
shapes strategy.
Let’s do PESTEL for:
Scenarios
Scenarios are plausible views of how the environment of an
organisation might develop in the future based on key drivers of change
about which there is a high level of uncertainty.
• Build on PESTEL analysis and drivers for change.
• Offer more than a single view. An organisation will typically develop
a few alternative scenarios (2–4) to explore and evaluate future
strategic options.
• Scenario analysis is used in industries with long planning horizons,
for example, the oil industry or airlines industry.
Fundamentals of Strategy (6th edition)

• Industry and Sector Analysis

Layers of the business environment
Industry and sector environments:
the key topics
Competitive forces: The five forces framework
Porter’s Five Forces Framework helps identify the attractiveness of an
industry in terms of five competitive forces:
• The threat of entry.
• The threat of substitutes.
• The bargaining power of buyers.
• The bargaining power of suppliers and.
• The extent of rivalry between competitors.
The five forces constitute an industry’s ‘structure’.
The five forces framework (1 of 6)

Source: Adapted from Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter, copyright © 1980, 1998 by The Free Press.
All rights reserved.
The five forces framework (2 of 6)
Rivalry between existing competitors
Competitive rivals are organisations with similar products and services aimed at
the same customer group and are direct competitors in the same
industry/market (distinct from substitutes).
The degree of rivalry depends on:
• Competitor concentration and balance.
• Industry growth rate.
• High fixed costs.
• High exit barriers.
• Low differentiation.
The five forces framework (3 of 6)
The threat of entry
Barriers to entry are the factors that need to be overcome by new entrants if they
are to compete. The threat of entry is low when the barriers to entry are high and
vice versa.
The main barriers to entry are:
• Economies of scale/Experience/Network effects.
• Access to supply and distribution channels.
• Differentiation and market penetration costs.
• Legislation or government restrictions (e.g. licensing).
• Expected retaliation.
• Incumbency advantages.
The five forces framework (4 of 6)
The threat of substitutes
Substitutes are products or services that offer a similar benefit to an industry’s
products or services, but have a different nature i.e. they are from outside the
industry.
Customers will switch to alternatives (and thus the threat increases) if:
• The price/performance ratio of the substitute is superior (e.g. aluminium
is more expensive than steel but it is more cost efficient for car parts)
• The substitute benefits from an innovation that improves customer
satisfaction (e.g. high speed trains can be quicker than airlines from city
centre to city centre on short haul routes).
• Extra-industry effects. Substitutes come from outside the incumbents’
industry which forces managers to look outside their own industry to
consider more distant threats and constraints.
The five forces framework (5 of 6)
The bargaining power of buyers
Buyers are the organisation’s immediate customers, not necessarily the ultimate
consumers.
If buyers are powerful, then they can demand cheap prices or product/service
improvements to reduce profits.
Buyer power is likely to be high when:
• Buyers are concentrated.
• Buyers have low switching costs.
• Buyers can supply their own inputs (backward vertical
integration).
• Low buyer profits (under pressure to improve profits) and the
purchased inputs have a low impact on quality (can cut costs
without loss of quality).
The five forces framework (6 of 6)
The bargaining power of suppliers
Suppliers are those who supply what organisations need to produce the product
or service. Powerful suppliers can reduce an organisation’s profits.
Supplier power is likely to be high when:
• The suppliers are concentrated (few of them).
• Suppliers provide a specialist or rare input.
• Switching costs are high (it is disruptive or expensive to
change suppliers).
• Suppliers can integrate forwards (e.g. low-cost airlines have
cut out the use of travel agents).
Visualisation industry analysis
Steps in an industry analysis
There are several important steps in an industry analysis before and
after analysing the five forces:
• Define the industry clearly.
• Identify the actors of each of the five forces and any different
groups within them and the basis for this.
• Determine the underlying factors of, and the total strength of,
each force.
• Assess the overall industry structure and attractiveness.
• Assess recent and expected future changes for each force.
• Determine how to position your business in relation to each
of the five forces.
5 Forces and the Airline Industry
• Buyer power: high, customers have more and more choice

• Supplier power: high, there are limited plane and engine

manufacturers to choose from

• Threat of substitute products or services: medium as there

are numerous transportation alternatives for short haul flights.
Long haul is a different story
5 Forces and the Airline Industry
• Threat of New Entrants: medium/high as new airlines are regularly
entering the market

• Rivalry among existing competitors: high, for this reason airlines

are often competing on price
Defining the industry
• The industry must not be defined too broadly (too wide to be meaningful) or
too narrowly (thus excluding important competitors).

• The broader industry value chain needs to be considered – different stages

in the value chain should be treated as separate industries.

• Industries can be analysed at different levels – for example, different

geographies, markets and even different product or service segments within
them (e.g. airline markets).
Porter’s 5 Forces Analysis for these 5 Corporations and
their Industries:
Team 4
Team 1
Li Dai
Huafeng Ji
Yigui Miao
Shali Yang
Yanming Mo
Jun Li
Huizhen Pu

Team 5
Team 2
Xiaoyin Wang
Chenjia Pan
Jingjing Wang
Peiyu Liu
Fan Xue
Yanhong Zhao
Wei Yu
Kai Hu

Team 3
Jessica Boya Yang
Chenjun Jiang
Yingwei Miao
Liangdong Gao
Issues with Five Forces Analysis
• Defining the ‘right’ industry. Applying the model at the most appropriate level
– not necessarily the whole industry. E.g. the European low-cost airline industry
rather than airlines globally.

• Converging industries – particularly in the high tech arenas – where industries

overlap (e.g. digital industries – mobile phones/cameras/mp3 players).

• Complementary organisations – which enhance the attractiveness

of a business to customers or suppliers. Microsoft Windows and
McAfee computer security systems are complementors. This can
almost be considered as a sixth force.
Strategic lock-in
Strategic lock-in is where users become dependent on a supplier and
are unable to use another supplier without substantial switching costs.

E.g. customers that bought music on Apple’s iTunes store could initially
only play it on Apple’s own iPod players.

Sometimes companies are so successful that they create an industry

standard under their own control (e.g. Microsoft’s Windows).
Table 3.1 Industry types
The industry life cycle
Strategic Management

• Resources and
• Capabilities
Resources and capabilities:
the key issues
Foundations of resources and capabilities
The resources and capabilities of an organisation contribute to its
long-term survival and potentially to competitive advantage.

• Resources are the assets that organisations have or can call upon
(e.g. from partners or suppliers), that is ‘what we have’.

• Capabilities (sometimes referred to as competences) are the ways

those assets are used or deployed, that is ‘what we do well’ .
Table 4.1 Resources and capabilities
Redundant capabilities
• Capabilities, however effective in the past, can become less
relevant as industries evolve and change.

• Such ‘capabilities’ can become ‘rigidities’ that inhibit change and

become a weakness.
Threshold and distinctive capabilities (1 of 2)
• Threshold capabilities are those needed for an organisation to meet
the necessary requirements to compete in a given market and achieve
parity with competitors in that market – ‘qualifiers’.

• Distinctive capabilities are those that are required to achieve

competitive advantage. Distinctive or unique capabilities that are of
value to customers and which competitors find difficult to imitate –
‘winners’.
Threshold and distinctive capabilities (2 of 2)
Core competences
Core competences1 are the linked set of skills, activities and
resources that, together:
• deliver customer value
• differentiate a business from its competitors
• potentially, can be extended and developed as markets change
or new opportunities arise.

1G. Hamel and C.K. Prahalad, ‘The core competence of the corporation’, Harvard Business Review, vol. 68, no. 3 (1990), pp. 79–91.
Strategic capabilities and competitive advantage
The four key criteria by which capabilities can be assessed in terms
of providing a basis for achieving sustainable competitive
advantage are:
• value
• rarity
VRIO 1
• inimitability and
• organisational support

1Jay Barney: ‘Firm resources and sustained competitive advantage’, Journal of Management, vol. 17, no. 1 (1991), pp. 99–120.
VRIO (1 of 5)
VRIO (2 of 5)
V – Value of resources and capabilities

Strategic capabilities are of value when they:

• take advantage of opportunities and neutralise threats;
• provide value to customers;
• are provided at a cost that still allows an organisation to make an
acceptable return.
VRIO (3 of 5)
R – Rarity

• Rare capabilities are those possessed uniquely by one organisation

or only by a few others.
(e.g. a company may have patented products, have supremely talented
people or a powerful brand.)

• Rarity could be temporary.

(e.g. Patents expire, key individuals can leave or brands can be de
valued by adverse publicity.)
VRIO (4 of 5)
I – Inimitability

Inimitable capabilities are those that competitors find difficult and costly to
imitate, to obtain or to substitute.
• Competitive advantage can be built on unique resources (a key individual
or IT system) but these may not always be sustainable (key people leave or
others acquire the same systems).
• Sustainable advantage is more often found in competences (the way
resources are managed, developed and deployed) and the way
competences are linked together and integrated.
VRIO (5 of 5)

O – Organisational support

The organisation must be suitably organised to support the valuable,

rare and inimitable capabilities that it has. This includes appropriate
processes and systems.
Summary VRIO analysis
A VRIO analysis helps to evaluate if, how and to what extent an
organisation or company has resources and capabilities that are:
(i) valuable;
(ii) rare;
(iii) inimitable;
(iv) supported by the organisation.
15.

115
Let’s work on the 3 Questions from the Groupon case:
Team 1 Team 4
Huafeng Ji Wei Yu
Yanming Mo Peiyu Liu
Yigui Miao Li Dai
Huizhen Pu Liangdong Gao

Team 5
Team 2
Chenjia Pan
Fan Xue
Jingjing Wang
Jessica Boya Yang
Chenjun Jiang
Kai Hu
Yingwei Miao

Team 3
Jun Li
Xiaoyin Wang
Shali Yang
Yanhong Zhao
16.
17.

118
18.
SWOT analysis
SWOT provides a general summary of the Strengths and Weaknesses
explored in an analysis of strategic capabilities (Chapter 4), and the
Opportunities and Threats explored in an analysis of the environment
(Chapters 2 and 3).

INTERNAL ANALYSIS = STRENGTHS

WEAKNESSES

EXTERNAL ANALYSIS = OPPORTUNITIES

THREATS
The TOWS matrix
Dangers in a SWOT/TOWS analysis
• Long lists with no attempt at prioritisation.

• Over generalisation – sweeping statements often based on

biased and unsupported opinions.

• SWOT is used as a substitute for analysis – it should result from

detailed analysis using the frameworks in Chapters 2 and 3.

• SWOT is not used to guide strategy – it is seen as an end in

itself.
Business Strategy

• Stakeholders and
Governance
• CSR
Stakeholders, governance and ethics
Who are the stakeholders?
Stakeholders are those individuals or groups that depend on an
organisation to fulfil their own goals and on whom, in turn, the
organisation depends.
Who are the stakeholders?

Stakeholders are those individuals or groups that depend on an

organisation to fulfil their own goals and on whom, in turn, the
organisation depends.
Types of stakeholder
Stakeholders can be divided into internal stakeholders (e.g. managers
and employees) and external stakeholders.

External stakeholders are of 4 types:

• Economic (e.g. suppliers, shareholders, banks)
• Social/political (e.g. government agencies)
• Technological (e.g. standards agencies)
• Community (e.g. local residents)
Stakeholder mapping
Stakeholder mapping identifies stakeholder power and attention
in order to understand political priorities.

The power and interest of stakeholders depend on the particular

issue being considered – different issues require different maps.
Conflicts of stakeholder interests and expectations
• Pursuit of short-term profits may suit shareholders and managerial bonuses but
come at the expense of investment in long-term projects.
• Family business owners may want business growth, but also fear the loss of
family control if they need to appoint professional managers.
• In large multinational organisations, conflict can result because of a local
division's responsibilities simultaneously to the company head-office and to its
host country.
• Going public on the stock market may raise funds, but require unwelcome
degrees of openness and accountability from management.
Stakeholder mapping: the power/attention matrix.

Source: Adapted from Newcombe, R. ‘From client to project stakeholders: a stakeholder mapping approach’’, Construction Management and Economics vol. 21, no. 8 (2003): 841-8.
Stakeholder mapping: Exercise
Power

Power is the ability of individuals or groups to persuade,

induce or coerce others into following certain courses of
action.
Table 5.2 Sources of power (1 of 2)
Table 5.2 Sources of power (2 of 2)
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.
Different governance models
Shareholder model Stakeholder model
 Higher rates of return
 Reduced risk  Long-term horizons
Advantages  Increased innovation and  Less reckless risk-taking
entrepreneurship  Better management
 Better decision-making

 Diluted monitoring  Weaker decision-making

 Vulnerable minority  Uneconomic investments
Disadvantages
shareholders  Reduced innovation and
 Short-termism entrepreneurship
The growing importance of governance
• The separation of ownership and management control –
defining different roles in governance.

• Corporate failures and scandals (e.g. Enron) – focusing

attention on governance issues.

• Increased accountability to wider stakeholder interests and the

need for corporate social responsibility (e.g. green issues).
The governance chain (1 of 2)
The governance chain shows the roles and relationships of different
groups involved in the governance of an organisation.

• In a small family business, the governance chain is simple.

• In large publicly-quoted corporations, however, influences on

governance can be complex – Figure 5.4.
The governance chain (2 of 2)

Source: Adapted from David Pitt-Watson, Hermes Fund Management.

The role of boards (1 of 3)
A single-tier board (typical of the shareholder model in UK and USA):
• A majority of directors may be non-executives.
• Non-executives represent the interests of shareholders.
• BUT choice of non-executives may be influenced by executives.

A two-tier structure (typical of the stakeholder model in Germany,

France and the Netherlands):
• A supervisory board represents a wider range of stakeholders.
• A management board plans strategy and has operational
control.
• Major strategic decisions have to be approved by both boards.
The role of boards (2 of 3)
Two key issues for boards:
• Delegation: strategy can be delegated to management but it is easier to
ensure other stakeholders are protected with a supervisory board.

• Engagement: The board can engage in the strategic management process

but board members may have insufficient expertise.
The role of boards (3 of 3)
Accepted good practice for boards includes:

• Operating ‘independently’ of management – the role of non-executives

is crucial.

• Being competent to scrutinise the activities of managers.

• Having time to do their job properly.

• Behaving appropriately given society’s expectations for trust, role

fluidity, collective responsibility and performance.
Issues in governance
• Who are the shareholders – should boards respond to the demands of
institutional investment managers or the needs of the ultimate
beneficiaries?
• The role of institutional investors – should they actively intervene in
strategy?
• Establishing the specific role of the board – in particular the role of
non-executive directors.
• Scrutiny and control – statutory requirements and voluntary codes to
regulate boards.
The ethics of individuals and managers
Ethical issues have to be faced at the individual level:
• The responsibility of an individual who believes that the strategy of the
organisation is unethical – resign, ignore it or take action

• ‘Whistle-blowing’ – divulging information to the authorities or media

about an organisation if wrong-doing is suspected.
Texas instruments’ guidelines
• Is the action legal? . . . If not, stop immediately.
• Does it comply with our values? . . . If it does not, stop.
• If you do it would you feel bad? . . . Ask your own conscience
if you can live with it.
• How would this look in the newspaper? . . . Ask if this goes
public tomorrow would you do it today?
• If you know it’s wrong . . . don’t do it.
• If you are not sure . . . ask; and keep asking until you get an
answer.
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’. 1

1 World Business Council for Sustainable Development.

Corporate social responsibility stances
Some questions of corporate social responsibility
(1 of 2)
Some questions of corporate social responsibility
(2 of 2)
Unilever Value Chain
Managing the Organisation
in the Strategic Context
Assessment Time
Assignment 1
Grading Assignment 1
The 6 Teams
• Five Groups of 3, and One Group of 4

• Time to prepare your approach this Sunday afternoon:

make your workplan

• Make sure that it is a coherent presentation for next week

• Have fun

• …and now let luck decide

169
Starbucks case teams:
Liangdong Gao Chenjia Pan
Xiaoyin Wang Jingjing Wang Team 1
Shali Yang Chenjun Jiang Team 2
Yanhong Zhao Yingwei Miao
Fan Xue
Team 3
Kai Hu
Huafeng Ji
Jessica Boya Yang Team 4
Jun Li
Yanming Mo Team 5
Wei Yu
Yigui Miao
Peiyu Liu Team 6
Huizhen Pu
Li Dai
THANK YOU
Guest Speaker

Pieter Bakker is a Telecom Executive with vast experience

in General - and Commercial Management roles. Pieter
has expertise in fixed line and mobile telecommunications
including Internet and data services and other ICT. He is a
seasoned professional with experience in various positions
in Europe, Africa, South America and the Pacific. In his last
assignment, he acted as CEO and Consultant for the
submarine cable company FSMT Cable Corporation in
Micronesia.