Strategic managementStrategic management

Lecture 10. Lecture 10.

The business ethics, social The business ethics, social responsibility, and responsibility, and

corporate culture corporate culture

Organisationstructure

and design

Resourceallocation

andcontrol

Managingstrategicchange

Strategyevaluation

and selection

Strategicoptions

Bases ofstrategicchoice

Strategicchoice

Strategyimplemen-

tation

Strategicanalysis

Resources,competencesand capability

Expectationsand purposes

Theenvironment

Process of strategic management

Expectations andExpectations and PurposesPurposes

Expectations and Purposes - Expectations and Purposes - OutlineOutline

1.1. Identification of oIdentification of organirganissational ational stakeholdersstakeholders

2.2. Stakeholder mappingStakeholder mapping

3.3. Corporate governanceCorporate governance

4.4. Ethical issuesEthical issues

5.5. CultureCulture

A Ford Pinto storyA Ford Pinto storyIn the 1970’s more and more company developed small, simple, and cheap In the 1970’s more and more company developed small, simple, and cheap

car, for the young persons. The Ford Co. delayed, and try th catch up. car, for the young persons. The Ford Co. delayed, and try th catch up. The management speed up the developments, and enters the market The management speed up the developments, and enters the market with the Ford Pinto. with the Ford Pinto.

There were more than 500 thousend car on the market when a serious There were more than 500 thousend car on the market when a serious accident happened: After driving away from the filling station two cra accident happened: After driving away from the filling station two cra collided, the Ford Pinto blow up, and three girl burned in the car. A collided, the Ford Pinto blow up, and three girl burned in the car. A magazin investigated the case and realised, that there were more than magazin investigated the case and realised, that there were more than 10 similar accidects, and there were 5 death 10 similar accidects, and there were 5 death

The company investigated the case and the analysis descovered: The company investigated the case and the analysis descovered: Back bumper weak, and were too near to the fuel tank. Back bumper weak, and were too near to the fuel tank. The engineeers know about the problems, however they were in delayThe engineeers know about the problems, however they were in delay The problems could be solved by building into cars a 10 The problems could be solved by building into cars a 10 $$ rubber plate rubber plate The management find that the car in this form met the existing safeti The management find that the car in this form met the existing safeti

regulations. regulations. However the company was lobbiing against rising the safety standards. However the company was lobbiing against rising the safety standards. The cost-benefit analysis describe, if they call back all the cars and The cost-benefit analysis describe, if they call back all the cars and

rebuild the car it would cost 11 m rebuild the car it would cost 11 m $$. . If the company will change only the future’s cars, there will be about 10 If the company will change only the future’s cars, there will be about 10

death, and it would cost about 10 m death, and it would cost about 10 m $$ for the company. for the company. The decision were: not the change. The decision were: not the change. There were 2 millió cars, about 11 death, but this number were better than There were 2 millió cars, about 11 death, but this number were better than

the industrial avarege. the industrial avarege.

Four Possible Ethical StancesFour Possible Ethical Stances

Business ethics – Business ethics – the societal expectations of organisationsthe societal expectations of organisations

Macro levelMacro level• Range from laissez faire to shapers of societyRange from laissez faire to shapers of society• Ethical stance of organisation in societyEthical stance of organisation in society• Extent an organisation exceeds its minimum Extent an organisation exceeds its minimum

obligations to stakeholders and societyobligations to stakeholders and society Corporate social responsibilityCorporate social responsibility

• Specific ways to exceed minimum obligations Specific ways to exceed minimum obligations imposed by legislation/corporate governanceimposed by legislation/corporate governance

• Reconcile conflicting demands of stakeholdersReconcile conflicting demands of stakeholders Individual levelIndividual level

• Behaviour and actions of individuals within Behaviour and actions of individuals within organisationsorganisations

The most important ethical conceptsThe most important ethical concepts

Moral: Relating to, dealing with, or capable of Moral: Relating to, dealing with, or capable of making the distinction between right and wrong making the distinction between right and wrong in conduct or characterin conduct or character

Ethics: The system or code of morals of a Ethics: The system or code of morals of a particular person, religion, group or profession. particular person, religion, group or profession.

Ethical: Conforming to moral standards, Ethical: Conforming to moral standards, conforming to the standards of conduct of a given conforming to the standards of conduct of a given profession or group. profession or group.

Ethical behaviour is what is accepted as „good” Ethical behaviour is what is accepted as „good”

and „right”, and as opposed to „bad” and and „right”, and as opposed to „bad” and „wrong” in the context of governing moral code. „wrong” in the context of governing moral code.

•Convincing yourself that the behaviour is not really illegal

•Convincing yourself that the behavoiur is really everyone’s best interests

•Convincing yourself that nobody will ever find out what you’ev done.

•Convincing yourself that the organization will protect you.

Four ways of rationalize ethical misconduct

Obey the Law.A basic tenet of social responsibility and mamagerial ethics is

obedience to the law, preferably both the letter and the spirit of the law.

Tell the truth.Telling the truth is important in building trust with relevant

stakeholders.Show respect for people.Stick to the „golden rule”."Do unto others as you would have them do unto you".Above all, do not harm.This principle - the first rule of medical ethics - is considered by

some writers to the bottom-line ethical consideration.Practice participation, not paternalism.This principle is aimed at learning about the needs of relevant

stakeholders, rather than deciding what is the best for them.Always act when you have responsibility.Managers have the responsibility of taking action whenever they

have the capacity or resources.

ETHICAL GUIDELINES FOR MANAGERS

1.Social obligation - corporate behavior at this level conforms only to legal requirements and competitive market pressures

2. Social responsibility - Corporate behavior at this level is congruent with prevailing norms, values, and expectations of society.

3. Social responsiveness - Corporate behavior at this level takes preventive action to avoid adverse social impacts from company activities and even anticipates or takes the lead in future movement beyond current expectations.

Continuum of social responsibility

Corporate Social ResponsibilityCorporate Social Responsibility

Internal AspectsInternal Aspects External AspectsExternal Aspects

Employee welfareEmployee welfare Environmental issuesEnvironmental issues

Working conditionsWorking conditions ProductsProducts

Job designJob design Markets and Markets and mmarketingarketing

Intellectual propertyIntellectual property SuppliersSuppliers

EmploymentEmployment

Community activityCommunity activity

Human rightsHuman rights

Some questions of corporate social responsibility

Some questions of corporate social responsibility

Ecology and Environmental QualityPollution cleanup and preventionDispersion of industryLand use and beautification

ConsumerismTruth in lending, advertising, and businessProduct warranty and serviceControl of harmful products

Community needsUse of expertise for local problemsAid with health-care facilities and educationService on voluntary groups

Governmental relationsRestrictions on lobbyingControl of business political action

The most important areas of the corporate social responsibility (1)

Minorities and Disadvantages personsTraining of unemployed Equal employment opportunityLocating plants and offices in minority areasPurchasing from minority businesses

Labor relationsImproved occupational health and safetyProvision of day-care centersOptions of flexible work hours

Stockholder relationsPublic seats on the board of directorsImproved financial disclosure

Corporate philanthrophyFinancial support for arts and cultureSpecial scholarships and gifts to educationFinancial support for assorted charities

The most important areas of the corporate social responsibility (2)

Majon arguments againts social responsibility

Major arguments for social responsibility

Loss of business profits Long-run profit for business

Increased business costs Public image of business will improve

Dilution of business purpose Better environmant for everyone

Too mach socila power for business

Public expectations support business social responsibility

Lack of business accountability to public

Business may avoid more regulation

Arguments for and againts of corporate social responsibilities

Corporate social responsibilityCorporate social responsibility

Corporate social responsibilityCorporate social responsibility ( (CSRCSR, also called , also called corporate consciencecorporate conscience, , corporate citizenshipcorporate citizenship, , social social performanceperformance, or , or sustainable responsible business/ sustainable responsible business/ Responsible BusinessResponsible Business))[1][1] is a form of corporate self- is a form of corporate self-regulation integrated into a business model. CSR policy regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international the spirit of the law, ethical standards, and international norms. The goal of CSR is to embrace responsibility for the norms. The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact company's actions and encourage a positive impact through its activities on the environment, consumers, through its activities on the environment, consumers, employees, communities, stakeholders and all other employees, communities, stakeholders and all other members of the public sphere who may also be considered members of the public sphere who may also be considered as stakeholders.as stakeholders.

Organisational CultureOrganisational Culture

“The basic assumptions and beliefs that areshared by members of an organisation, thatoperate unconsciously and define in a basictaken-for-granted fashion an organisation’sview of itself and its environment”

Schein 1997

“The basic assumptions and beliefs that areshared by members of an organisation, thatoperate unconsciously and define in a basictaken-for-granted fashion an organisation’sview of itself and its environment”

Schein 1997

Organisational CultureOrganisational Culture

Corporate culture

Patterns of behaviour based on mutual values and ways of thinking within a certain corporate.

Each company has its own norms of behaviour, which help its members to understand what the organisation represents.

Culture as mental programming

Hofstede’s idea of culture• Every person has patterns of

thinking, feeling and potential acting

• Analogy to way computers are programmed = mental programs or software of the mind

Culture is the collective programming of the mind, which distinguishes

the members of one group of people from an other!

Cultural Frames of ReferenceCultural Frames of Reference

Organisational FieldOrganisational Field Organisations within a field have:Organisations within a field have:

• Common business environmentCommon business environment• Common norms and valuesCommon norms and values• Shared set of assumptionsShared set of assumptions• A recipe of organizational purpose and shared A recipe of organizational purpose and shared

wisdomwisdom Dangers:Dangers:

• Institutionalised managers may be blinkeredInstitutionalised managers may be blinkered• Transition between sectors difficultTransition between sectors difficult

Legitimacy:Legitimacy:• Need to meet expectations in terms of Need to meet expectations in terms of

assumptions, behaviours and strategassumptions, behaviours and strategiesies

Ch. HANDY’s classification of corporate culture Ch. HANDY’s classification of corporate culture

High formalisation High formalisation Low formalisationLow formalisation

High High centralisationcentralisation

Role culture Role culture

(Like a bank)(Like a bank)

Power culture Power culture

(Like az entrepreneur)(Like az entrepreneur)

Low Low centralisation centralisation

Task culture Task culture

(Like a software-(Like a software-development team development team

Personality culture Personality culture

(Like a lawyer’s (Like a lawyer’s association)association)

HANDY’s classification of corporate HANDY’s classification of corporate culturescultures

Handy defines four major corporate cultures, in which Handy defines four major corporate cultures, in which the organisational structure of the given culture can be the organisational structure of the given culture can be found.found.Power or ‘club’ culturePower or ‘club’ cultureStructure: like a web, with a spider Structure: like a web, with a spider in the middle, a boss possessing in the middle, a boss possessing all power.all power.

Zeus, directed by his instinct and caprice.Zeus, directed by his instinct and caprice.

Most important is the relationship Most important is the relationship with the central leader.with the central leader.Important is the belief in individual performance.Important is the belief in individual performance.Rating is based on result. Flexible structureRating is based on result. Flexible structure

HANDY’s classification of corporate HANDY’s classification of corporate culturescultures

Role cultureRole culture

Classical burClassical bureaueaucracy.cracy.

Like a Greek temple, works Like a Greek temple, works

according to logic and rationality.according to logic and rationality.

Apollo, God of clear mind and practicality.Apollo, God of clear mind and practicality.

Function is dominated, not the individual.Function is dominated, not the individual.

Stability and predictability are important.Stability and predictability are important.

Rigid structure.Rigid structure.

HANDY’s classification of corporate HANDY’s classification of corporate culturescultures

Task cultureTask cultureConcentrates on successful fulfilment of Concentrates on successful fulfilment of tasks.tasks. Like a matrix, power is in the Like a matrix, power is in the cutting points.cutting points. Source of power are Source of power are the knowledge and expertise.the knowledge and expertise.Pallas Pallas AthenAthenee, Goddess of wisdom, , Goddess of wisdom, nature and inventions.nature and inventions.Team culture, the result by joint effort Team culture, the result by joint effort is important.is important.Objective oriented and flexible. Objective oriented and flexible. Hard to carry out control, short life.Hard to carry out control, short life.

HANDY’s classification of corporate HANDY’s classification of corporate culturescultures

Personality culturePersonality cultureIndividuality oriented, Individuality oriented, structure lives for the structure lives for the realisation of the objectives realisation of the objectives of the individuals.of the individuals.Loose cooperation of highly Loose cooperation of highly qualificated individuals.qualificated individuals.

Dionysus, autonomous Dionysus, autonomous God of wine and ecstasy.God of wine and ecstasy.

• Entreprenurial culture is one that fosters positive attitudes towards entrepreneurship

• Environment which combines social,political and educational attributes.

• USA is the most entreprenurial culture of the world:

-always seeking sg. new-achievement-orientation-they worship innovation-non-conformist-entrepreneurship is a career option

HOFSTEDE: Impact of national culture on corporate culture

Market Family

Machine

Pyramid

GB, USA, Canada, Denmark

Germany, Finland, Austria

India, Malaysia

France, Japan, Hungary, Greece

Power distancelow high

high

low

Un

certa

inty

avoid

an

ce

Entrepreneurial culture: Hofstede’s dimensions

Individualism vs.collectivism

Individualism vs.collectivism

Power distancePower distance

Uncertaintyavoidance

Uncertaintyavoidance

masculinitymasculinity

This is the degree to which people prefer to act as individuals rather than groups.? Me-culture

This level depends on the socio-culture of the country.Individualism: West-Europe, USA

Collectivism: We -culture: Japan, China, South-America

This is the degree to which people prefer to act as individuals rather than groups.? Me-culture

This level depends on the socio-culture of the country.Individualism: West-Europe, USA

Collectivism: We -culture: Japan, China, South-America

This is the degree of inequality among people that the community is willing to accept.

Low power distance: informal and open relation, flat structures in organisation. Example: UK, USA, Scandinavia

High power distance: formal relation, hierarchies: France, RussiaSouth America

This is the degree of inequality among people that the community is willing to accept.

Low power distance: informal and open relation, flat structures in organisation. Example: UK, USA, Scandinavia

High power distance: formal relation, hierarchies: France, RussiaSouth America

Degree to which people prefer to avoid uncertainty and prefer structured rather than unstructured situation.

Low uncertainty avoidance: prefer flexibility, high risk-taking, ambiguity. Example: USA, Scandinavia

High uncertainty avoidance: prefer rules and procedures.

Degree to which people prefer to avoid uncertainty and prefer structured rather than unstructured situation.

Low uncertainty avoidance: prefer flexibility, high risk-taking, ambiguity. Example: USA, Scandinavia

High uncertainty avoidance: prefer rules and procedures.

This define quality of life issue. Masculine virtues are: assertiveness, competition and success,social gender roles are

distinct.Feminine virtues: modesty, compromise and co-operation social

gender roles overlap. Important: warmth in personal relationships.

This define quality of life issue. Masculine virtues are: assertiveness, competition and success,social gender roles are

distinct.Feminine virtues: modesty, compromise and co-operation social

gender roles overlap. Important: warmth in personal relationships.

CountryCountry PDIPDI IDVIDV MASMAS UAIUAI

AustriaAustria 1111 5555 7979 7070

FinlandFinland 3333 6363 2626 5959

FranceFrance 6868 7171 4343 8686

GreeceGreece 6060 3535 5757 112112

Great Great BritainBritain

3535 8989 6666 3535

GermanyGermany 3535 6767 6666 6565

HungaryHungary 3131 5555 7979 8383

ItalyItaly 5050 7676 7070 7575

JapanJapan 5454 4646 9595 9292

SwedenSweden 3131 7171 55 2929

USAUSA 4040 9191 6262 4646

VenezuelaVenezuela 8181 1212 7373 7676

Competitive advantages of different culture profiles

Power distance smallPower distance small

Acceptance of Acceptance of responsibilityresponsibility

Power distance largePower distance large

DisciplineDiscipline

CollectivismCollectivism

Employee commitmentEmployee commitmentIndividualismIndividualism

Management mobilityManagement mobility

FemininityFemininity

Personal service, Personal service, agricultureagriculture

MasculinityMasculinity

Mass production, heavy Mass production, heavy industryindustry

Uncertainty avoidance Uncertainty avoidance weakweak

Basic innovationsBasic innovations

Uncertainity Uncertainity avoidance avoidance

Strong precisionStrong precision

Relationship between national and corporate

cultures

Major differences between national and corporate cultures

• Values of national culture are incorporated to our mind until age of 10-12.

• We are not affected that deep by the corporate culture.

National cultural features can be

observed more at work than corporate culture.

The Cultural WebThe Cultural Web

The Cultural Web: some useful questions

Problems of conflicts of cultures at Problems of conflicts of cultures at international acqusitions and fusionsinternational acqusitions and fusions

Conflicts of both national and Conflicts of both national and corporate cultures corporate cultures

1 Deculturisation1 Deculturisation – aggressive merging – aggressive merging2 Separation2 Separation – both cultures live – both cultures live

further parallelfurther parallel3 Assimilation3 Assimilation – One culture – One culture

dominates, merging a slow and dominates, merging a slow and peaceful processpeaceful process

4 Integration4 Integration – equal, balanced – equal, balanced merging of two culturemerging of two culturess by creating a by creating a new one.new one.

DEAL and KENNEDY DEAL and KENNEDY corporate structure categoriescorporate structure categories

Basis of categorisation is rate of the Basis of categorisation is rate of the risk undertaken and the speed of risk undertaken and the speed of the feed back of success.the feed back of success.

1 Tough guy, macho culture1 Tough guy, macho culture High risk, prompt feed-back on High risk, prompt feed-back on

success, slogan: success, slogan: ‘seek for a hill and ‘seek for a hill and climb it’climb it’

Specification: pushy, extravagant Specification: pushy, extravagant personspersons

e.g. stock exchange, TV producerse.g. stock exchange, TV producers

DEAL and KENNEDY DEAL and KENNEDY corporate structure categoriescorporate structure categories

2 ‘Work hard/ play hard’ culture2 ‘Work hard/ play hard’ culture SlogSlogaan: n: ‘Seek for a need and ‘Seek for a need and

satisfy it’satisfy it’.. Small risk, but prompt feed-back Small risk, but prompt feed-back

on success.on success. CContinuous team work.ontinuous team work. Good consumer servise is a must Good consumer servise is a must

in this culture.in this culture. E.g. service companies, E.g. service companies,

department stores, computer department stores, computer dealers, etcdealers, etc..

DEAL and KENNEDY DEAL and KENNEDY corporate structure categoriescorporate structure categories

3 ‘Bet-your-company’ culture3 ‘Bet-your-company’ culture

Big, long term risk, very slow Big, long term risk, very slow feed-back.feed-back.

Slow and sound analytical Slow and sound analytical workwork

Slow rating of employees.Slow rating of employees.

E.g. Investment banks, space E.g. Investment banks, space research, cancer research, etc.research, cancer research, etc.

DEAL and KENNEDY DEAL and KENNEDY corporate structure categoriescorporate structure categories

44 ‘‘process’ cultureprocess’ culture

Low risk, very slow feed-back Low risk, very slow feed-back on success, if it exists at all.on success, if it exists at all.

Hard to detect the performance Hard to detect the performance of the employees.of the employees.

Working process is highlighted.Working process is highlighted.

E.g. burE.g. bureaueaucratic banks, cratic banks, insurance companies, insurance companies, governmental officesgovernmental offices