The Strategic Position: Strategic Purpose

1. The Strategic Position
4: Strategic Purpose

2. Learning Outcomes (1)
Identify the components of the governance
chain of an organisation
Understand differences in governance
structures across the world and the
advantages and disadvantages of these
Identify differences in the corporate social
responsibility stances taken by
organisations and how ethical issues relate
to strategic purpose
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-2

3. Learning Outcomes (2)
Undertake stakeholder analysis as a
means of identifying the influence of
different stakeholder groups in terms of
their power and interest
Consider appropriate ways to express the
strategic purpose of an organisation in
terms of statements of values, vision,
mission, or objectives
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-3

4. Exhibit 4.1 Influences on
Strategic Purpose
Governance
structure
Strategic
purpose
Social
responsibility
and ethics
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-4
Stakeholder
expectations

5. What are Stakeholders?
Stakeholders are those individuals
or groups who depend on an
organisation to fulfil their own goals
and on whom, in turn, the
organisation depends.
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-5

6. What is 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.
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-6

7. Exhibit 4.2 The Chain of
Corporate Governance
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8. Issues Highlighted
by the Governance Chain
To whom are executives responsible?
Who are the shareholders?
What is the role of institutional investors?
What means of scrutiny and control exist?
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-8

9. Reasons for Imperfect Operation
of the Governance Chain
Lack of clarity on end beneficiaries
Unequal division of power
Different levels of access to inform
Self-interest among agents
Measures and targets reflect agent self-interests
rather than those of end
beneficiaries
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-9

10. Exhibit 4.3 Benefits and Disadvantages of
Governance
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11. Guidelines for Boards
Operate independently of management
Be competent to scrutinise the activities of
management
Have time to do job properly
Behave appropriately given expectations
for trust, role fluidity, collective
responsibility, and performance
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-11

12. Ownership Choices
Private or public ownership of equity
Sale of all or part
Acquisition
Mutual ownership and partnership
Privatisation
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-12

13. What is
Corporate Social Responsibility?
Corporate social responsibility
(CSR) is concerned with the ways in
which an organisation exceeds its
minimum obligations to stakeholders
specified through regulation.
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-13

14. Stances on Social Responsibility
Laissez-faire Enlightened
self-interest
Forum for stakeholder
interaction Shaper of society
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15. BP and The Texas City Disaster
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16. Exhibit 4.6 TI’s Approach to Ethics
Is the action legal? Does it comply
with values?
Will you feel bad? How would it
look in newspaper?
Do you know
it is wrong? Are you sure?
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-16

17. Exhibit 4.7 Stakeholders of a
Large Organisation
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18. What is Stakeholder Mapping?
Stakeholder mapping identifies
stakeholder expectations
and power and helps in
understanding political priorities.
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-18

19. Exhibit 4.9 The Power/Interest Matrix
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20. Questions Addressed with
Stakeholder Mapping
 In determining purpose and strategy, which
stakeholder expectations need to be most
considered?
 Do the actual levels of interest and power reflect
the corporate governance framework?
Who are the key blockers and facilitators of
strategy?
 Is it desirable to reposition certain stakeholders?
 Can level of interest or power of key stakeholders
be maintained?
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-20

21. What is Power?
Power is the ability of individuals or
groups to persuade, induce, or
coerce others into following certain
courses of action.
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-21

22. Sources of Power
Within Organisations
Hierarchy
Involvement
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Influence
Control of
strategic
Knowledge resources
possession
Control of
human
resources

23. Sources of Power
For External Stakeholders
Control of
strategic
resources
Knowledge
possession
Informal links
to internal
power
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-23
Involvement

24. Indicators of Power
For Within Organisations
Status
Symbols
Representation
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Resource
claims

25. Indicators of Power
For External Stakeholders
Status
Symbols
Negotiating
arrangements
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-25
Resource
dependence

26. Organisational Purposes
Values
Mission statement
Vision statement
Objectives
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27. What are Core Values?
Core values are the
underlying principles that guide
an organisation’s strategy.
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-27

28. What are Mission and Vision
Statements?
A mission statement provides
employees and stakeholders with clarity
about the overall purpose of the
organisation.
A vision statement is concerned with
what the organisation
aspires to be.
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-28

29. What are Objectives?
Objectives are statements
of specific outcomes
that are to be achieved.
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-29

30. Case Example:
Product Red and Gap
What is the rationale of the founders
of Product Red?
Is Product Red an appropriate
corporate activity?
Exploring Corporate Strategy 8e, © Pearson Education 2008 4-30