strat man 5th ed ch6 slctd slides

Richard Lynch, Strategic Management 5th Edition, Pearson Education

www.global-strategy.net

How do we develop the purpose of the How do we develop the purpose of the organisation? organisation?

Video Summary Chapter 6Video Summary Chapter 6

© Copyright Richard Lynch 2009. All rights reserved



Understanding the organisation’s purpose - 1Understanding the organisation’s purpose - 1

Environment

Resources

Purpose

Options

Options

Options

Choice Implement

This session



Purpose

Vision of the future Stakeholder power

Governance, Ethics and Corporate Social Responsibility

Organisation’s mission and objectives

Understanding the organisation’s purpose - 5Each of these topics forms part of the study of ‘purpose’



Developing the purpose of the organisation - 2Developing the purpose of the organisation - 2

Five main questions to be considered: What is our area of activity - and what should it

be? What kind of organisation do we wish to be? What is the relative importance of shareholders

and stakeholders? Do we want to grow the organisation? What is our relationship with our immediate

environment and with society in general?



Identifying a vision for the future - 2Identifying a vision for the future - 2

“...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 & Nanus 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



Identifying a vision for the future -3Identifying a vision for the future -3

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 managementKeypoint: there is no ‘strategic formula’ for

developing a vision



Stakeholders are the individuals and groups who have an interest in the organisation and, therefore, may wish to influence aspects of its mission, objectives and strategies

For example at Starbucks, stakeholders will include shareholders, managers and employees

In developing the organisation’s purpose, there are two sets of interests:– Those who have to carry out the purpose:

employees, managers, directors– Those who have a stake in the outcome:

shareholders, suppliers, government, customers and other interested parties

Importantly, stakeholding extends beyond those who own and work in the organisation

Coping with stakeholder power - 2



Typical stakeholders:– Owners: wanting a financial return– Employees: wanting high salaries and wages– Customers: buying quality goods and

services– Creditors: assessing the creditworthiness of

the organisation– Suppliers: wanting payment– Local community: wanting safety and local

contribution to society– Government: needing compliance with law

and also a contribution to society

Coping with stakeholder power - 2

Typically, there are

conflicts of interest

between stakeholders



Corporate Governance, Ethics and Corporate Governance, Ethics and Corporate Social responsibilityCorporate Social responsibility

Corporate Governance refers to the influence and power of the stakeholders to control the strategic direction of the organisation in general and, more specifically, the authority of the chief executive and other senior officers of the organisation.

Corporate governance is primarily concerned with the power vested in the chief executive and other senior managers

Ethics and Corporate Social Responsibility (often shortened to CSR) refers to the standards and conduct that an organisation sets itself in its dealings within the organisation and with the outside environment



What is Corporate Governance?What is Corporate Governance?

Corporate Governance relates to two main areas:– Selection and conduct of the senior officers of the

organisation– Relationships of the senior officers with owners,

employees and other stakeholders of the organisation Its importance relates to the power given to senior officers

to run the organisation Various checks on such power:

– information relayed to stakeholders– Appointment of non-executive directors

Corporate Governance is more a matter of principles of conduct than a series of simple rules



Ethics and CSR -1Ethics and CSR -1

Ethics and Corporate Social Responsibility (CSR) are the standards and conduct that an organisation sets itself in its dealings within the organisation and outside with its environment: they need to be reflected in the organisation’s mission statement

Ethics is particularly concerned with the basic standards of conduct set by an organisation such as honesty and the treatment of employees

CSR is a broader concept concerned with the role and contribution of the organisation in society: topics will vary but may include environmental ‘green’ issues, treatment of employees and suppliers, charitable work and contribution to the nation



Ethics and CSR -3 Ethics and CSR -3

Three prime considerations in developing ethics and CSR:– extent of ethical considerations– their cost and– the recipient of the responsibility

There are numerous differences between organisations over what should be covered under ethics, reflecting fundamentally different approaches to doing business and to directing public sector organisations

There are no simple rules Fundamentally, ethics and CSR must be part of the

organisation’s purpose and guide the development of its strategy



How to formulate a mission statement - 1

Some basic questions to be considered in developing mission: What is our area of activity - and what should it be? What kind of organisation do we wish to be? What is the relative importance of shareholders and

stakeholders? Do we want to grow the organisation? What is our relationship with our immediate environment and

with society in general?

“Mission: a summary of the broad directions that the organisation should and will follow, together with the

reasoning and values that lie behind it.”



“What’s the difference between vision, mission and objectives?”

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



How to develop objectives - 1

‘Objectives take the generalities of the mission and turn them into more specific commitments: usually this will cover what is to be achieved and over what timescale’

Developing objectives can begin by analysing the external strategic context: – What is the purpose and objectives of our competitors?– Are there any relevant possible and probable outside events,

such as economic growth or rise in raw material costs? – Is it possible and appropriate to have clearly and specifically

defined objectives?



How to develop objectives - 2 Development of objectives then needs to analyse the

internal strategic context: – Ownership of the organisation: what are the

requirements of the owners?– History of the organisation: how have objectives been

set in the past?– Organisational culture – aggressive? mild? etc will

impact on objective setting Consider implications for objective-setting, especially on

style of process – consultative, imposed from above, etc. Consider competitive advantage both now and future Translate into some outline business objectives – not

necessarily quantified at this stage– with relevant timescales

strat man 5th ed ch6 slctd slides

Education

corporate social responsibility

corporate governance

chief executive

relative importance

specific commitments

imaginative picture

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richard lynch