Business Strategy and New Realities

The Corporate Mission

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 Stakeholders and the Enterprise

Contributions

Inducements

Contributions Inducements

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 Stakeholder Impact Analysis

1. Identify stakeholders
2. Identify stakeholders’ interests and
concerns
3. Identify resulting claims stakeholders are
likely to make
4. Identify most important stakeholders
(from the organization's perspective)
5. Identify the resulting strategic challenges

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 Mission Statement
A formal commitment to stakeholders that the
firm’s strategy incorporates and recognizes their
claims on the organization.
Mission statement elements:

A declaration of the overall vision, or mission.

A summation of managerial philosophical values.

An articulation of key organizational goals.

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 Vision, or Mission

A statement of purpose (strategic

(strategic intent)
intent)
committing the organization to ambitious
overarching (stretch
(stretch)) goals.

Provides a sense of direction and purpose.

Drives strategic decision making
and resource allocations.

Forces the seeking of
significant performance
improvements to
attain goals.

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 Customer Orientation and Business Definition

Abell’s Framework
for Defining the
Business

Consumer
Consumer--oriented
versus
Product--oriented
Product
business definition

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 Values

Johnson & Johnson’s credo

sets its responsibilities to:

1. J&J product users.

2. J&J employees.
3. Communities in which J&J
employees live and work.
4. J&J stockholders.

FIGURE 2.3

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 Goals
Good goal characteristics:

Precise and measurable

Address important issues

Challenging but realistic

Time period specified
The overriding organizational goal:

Maximizing shareholder returns.
Firms need both short-
short- and long
long--term goals.

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 The Corporate Governance Problem
On-
On-the
the--job consumption

Elaborate and expensive
perks for top management.
Excessive pay not linked
to performance

Down markets and upward spirals of executive
pay.
Empire building

Buying additional businesses that increase the
size of the company without increasing
shareholder wealth.
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The Tradeoff Between Profitability
and Growth Rate

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 Corporate Governance Mechanisms
Board of directors
Stock--based compensation
Stock
Corporate takeovers

Takeover constraints

Corporate raiders

Greenmail
Leveraged buyouts

Managers offer to exchange equity for debt in a
leveraged buyout (purchase of the company).

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 Strategy and Ethics

The purpose of business ethics

To provide the tools for dealing with moral
complexity in strategic decisions.
Shaping the organization’s ethical climate

Emphasizing the importance
of strong ethical values by top
management.

Including the values in the
organization’s mission statement.

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Thinking Through Ethical Problems

A model of ethical decision making

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 Corporate Social Responsibility
The sense of obligation to include social
criteria in strategic decision making.
Pro:

It is the right way for a firm to behave.

Economic actions have social consequences.

Social behavior affects the firm’s market
value.
Con:

A firm’s primary obligation is to maximize
profits for its stakeholders in open
competition.
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