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Business Capstone: Research And Plan Development

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    External environments are all events outside a company that have the potential to influence or affect it.

    There are two perspectives on to whom organizations are socially responsible: the shareholder model and the stakeholder model. According to Nobel prize-winning economist Milton Friedman, the only social responsibility that organizations have is to satisfy their owners, that is, company shareholders. This view--called the shareholder model --holds that the only social responsibility that businesses have is to maximize profits. By maximizing profit, the firm maximizes shareholder wealth and satisfaction. More specifically, as profits rise, the company stock owned by company shareholders generally increases in value. By contrast, under the stakeholder model , management’s most important responsibility is long-term survival (not just maximizing profits), which is achieved by satisfying the interests of multiple corporate stakeholders (not just shareholders). Stakeholders are people or groups with a legitimate interest in a company. Since stakeholders are interested in and affected by the organization's actions, they have a "stake" in what those actions are. Consequently, stakeholder groups may try to influence the firm to act in their own interests.

    Friedman argues that it is socially irresponsible for companies to divert their time, money, and attention from maximizing profits to social causes and charitable organizations. The first problem he sees is that organizations cannot act effectively as moral agents for all company shareholders. While shareholders are likely to agree on investment issues concerning a company, it is highly unlikely that they possess common views on what social causes a company should or should not support. The second major problem, according to Friedman, is that the time, money, and attention diverted to social causes undermine market efficiency. In competitive markets, companies compete for raw materials, talented workers, customers, and investment funds. Spending money on social causes means there is less money to purchase quality materials or to hire talented workers who can produce a valuable product at a good price. If customers find the product less desirable, sales and profits will fall. If profits fall, stock prices will decrease and the company will have difficulty attracting investment funds that could be used to fund long-term growth. In the end, Friedman argues, diverting the firm’s money, time, and resources to social causes hurts customers, suppliers, employees, and shareholders.

    Some stakeholders are more important to the firm’s survival than others. Primary stakeholders are groups, such as shareholders, employees, customers, suppliers, governments, and local communities, on which the organization depends for long-term survival. So when managers are struggling to balance the needs of different stakeholders, the stakeholder model suggests that the needs of primary stakeholders take precedence over the needs of secondary stakeholders. However, contrary to the shareholder model, no primary stakeholder group is more or less important than another, since all are critical to the firm’s success and survival. So managers must try to satisfy the needs of all primary stakeholders. Secondary stakeholders , such as the media and special interest groups, can influence or be influenced by the company. Yet in contrast to primary stakeholders, they do not engage in regular transactions with the company and are not critical to its long-term survival. Consequently, meeting the needs of primary stakeholders is usually more important than meeting the needs of secondary stakeholders. While not critical to long-term survival, secondary stakeholders are still important, because they can affect public perceptions and opinions about socially responsible behavior.

    One question that managers often ask is, “Does it pay to be socially responsible?” While this is an understandable question, asking whether social responsibility pays is a bit like asking if giving to your favorite charity will help you get a better-paying job. The obvious answer is no. There is not an inherent relationship between social responsibility and economic performance. However, this doesn’t stop supporters of corporate social responsibility from claiming a positive relationship. In the end, if company management chooses a proactive or accommodative strategy toward social responsibility (rather than a defensive or reactive strategy), it should do so because it wants to benefit society and its corporate stakeholders, not because it expects a better financial return.

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    Business Capstone: Research And Plan Development - Presentation Transcript

    1. CLASS #2: Understanding the Nature of Strategy
    2. Today’s Agenda
      • What is Strategy?
      • External Analysis: The First Tools
        • Environmental Scanning
        • Forecasting and Scenario Analysis
      • BA453 Project and Research Methods
      BA453/ Hjelm/ University of Oregon
    3. What Is Strategy (Porter)?
      • Goal: Sustainable profitability
      • Operational effectiveness – necessary but not sufficient
      • Strategic positioning – perform different activities or same activities differently
        • Variety, needs, access
        • Unique & valuable position
        • Trade offs
      • Fit – whole system is mutually reinforcing
      BA453/ Hjelm/ University of Oregon
    4. What Is Strategy (Dodd and Favaro)? Recognize, acknowledge and think through competing objectives
    5. What Is Strategy (Dodd and Favaro)?
      • Each tension raises different questions and prompts managers to take a different focus
        • Profitability/growth focuses on the business model and strategy – what it does for customers and how it configures costs to support that
        • Short term/long term focuses on the management model – how the company manages performance and investments, targets, processes, and routines
        • Whole/parts focuses on organizational model – structure, culture and people
      • Look at how to strengthen the factor that unites two sides of the tension, rather than designate a “lead” tension
        • Profitability/growth united by customer benefit (Gillette and Cadbury’s examples)
        • Short term/long term united by sustainable earnings (BP and Barclay’s examples)
        • Whole/parts united by diagonal assets (Textron and Cardinal Health examples)
      BA453/ Hjelm/ University of Oregon
    6. Why is Strategic Intent Important (Prahalad and Hamel)?
      • Fit model can lead to overfocus on current opportunities and existing resources – without looking at new resources and future opportunities
      • New competitors can arise without resources or capabilities, but with great ambitions and an obsession to win
      • Planning requires an ambitious vision and goals that stretch and company, not just finding ways to build resources to meet the goal
      BA453/ Hjelm/ University of Oregon Strategic Intent: “active focusing on the essence of winning”
    7. All of these strategists reinforce the idea that strategies are emergent Source: Adapted from H. Mintzberg and A. McGugh, Administrative Science Quarterly, Vol. 30. No. 2, June 1985. BA453/ Hjelm/ University of Oregon
    8. External Analysis
    9. Changing Environments
      • Environmental Change
      • Environmental Complexity
      • Resource Scarcity
      • Uncertainty
      Characteristics of Changing External Environments BA453/ Hjelm/ University of Oregon
    10. Identifying a strategic direction requires a good deal of analysis – using a wide variety of tools.
      • Commonly Used Analytic Tools
      • Environmental Scanning (PEST)
      • Forecasting and Scenario Analysis
      • Five Forces Model
      • Competitive Analysis and Benchmarking
      • Strategic Group Analysis
      • VRINE
      • SWOT Analysis
      • Value Chain Analysis
      BA453/ Hjelm/ University of Oregon
    11. The PEST Framework Supports Environmental Scanning of the Macroenvironment BA453/ Hjelm/ University of Oregon PEST = Political, Economic, Sociocultural (Demographic and Psychographic/Cultural), and Technological
    12. To Whom Are Organizations Socially Responsible? Shareholder Model Stakeholder Model Maximize Profits Satisfy Interests of Multiple Stakeholders
    13. Shareholder Model
      • Managers cannot act effectively as moral agents for shareholders
        • Shareholders can use their increased wealth to contribute to social causes
      • Time, money, and attention diverted to social causes undermine market efficiency
    14. Stakeholder Model Primary Stakeholders: Shareholders Employees Customers Suppliers Governments Local Communities Secondary Stakeholders: Media Special Interest Groups Trade Associations The Stakeholder Model holds that it is a manager’s duty to take actions that will benefit the interests of society as well as the organization
    15. Evidence is Building that Social Responsibility Has a Positive Impact on Economic Performance Realities of Social Responsibility Can cost a company Increasingly does show a return in loyalty, demand and share value Does not guarantee profitability
    16. An important tool for your toolkit is Contingency or Scenario Planning
      • Create alternative hypothetical but equally likely future conditions – positive and negative
      • Develop strategies to cope with each scenario
      • Establish indicators to track progress and probability that scenarios will occur
      BA453/ Hjelm/ University of Oregon More than 50% of the Fortune 500 use some form of scenario planning.
    17. Prioritize Issues by Impact and Probability as the Basis of Scenario Planning Impact Probability In-depth analysis; develop strategies Monitor and analyze Monitor and analyze; contingent strategies considered Monitor High Low High Low BA453/ Hjelm/ University of Oregon
    18. Business Plan Details
    19. Deliver a Complete and Coherent Written Plan
      • Groups of 5 people with balanced skills – your choice
      • Company of your choice – with client suggestions and background info
      • Common questions, but content tailored to specific issue team is addressing
      • Substantiated with research, with everything cited and referenced
      • Integrated use of graphics, charts and tables
      • Aesthetically appealing
      • Grammatically and structurally superb
      BA453/ Hjelm/ University of Oregon
    20. Your Content Should Address Four Interdependent Factors
        • The Opportunity: where it will compete, how it will grow, its economics, the competitive advantage – how it differs from others and how it will sustain this
        • The Context: Environmental factors and how changes will affect the business
        • The Resources and Competencies: key resources and management talent as well as remedies for filling gaps
        • Risks and Rewards: factors that can impact positively and negatively and how the business model will react
      BA453/ Hjelm/ University of Oregon
    21. The final product is a complete business plan – strategy, recommendations, payoff and implementation guide. BA453/ Hjelm/ University of Oregon MODEL THE FUTURE ORGANIZATION
      • Who will be our Customers?
      • What will we Service?
      • How will it be Delivered?
      • At what Cost?
      • For what Returns?
      CREATE MODEL DEVELOP REQUIREMENTS DEVELOP GAP ANALYSIS ASSESS CAPABILITIES INTERNAL EXTERNAL INTEGRATED MODEL
        • Processes
        • Structure
        • Decision Support
        • People
        • Rewards
        • Steps
        • Timeframes
        • Resources
        • Costs
      DETAILS MIGRATION
    22. The Plan Must Establish Clear and Reasonable Goals and a Plan to Achieve Them S.M.A.R.T. BA453/ Hjelm/ University of Oregon Specific
          • Measurable
          • Attainable
          • Realistic
          • Timely
    23. Your Final Presentation Will Sell Your Recommendations
      • Content
        • Positioning and unmet needs
        • Recommendation
        • Execution
        • Payoff and anticipated outcomes
      • Delivery and pacing
        • Smooth and efficient
        • Engage audience
        • Effective Q&A
      • Visual aids
        • Complement, not replicate audio portion
        • Engage, not distract
      BA453/ Hjelm/ University of Oregon
    24. Your Plan Will be Judged Successful if You Ensure: Acceptance . . . . of Ideas Expediency . . . of Analysis and Choice of Tools Accuracy . . . . . . of Information and Results Relevance . . . . . of Business Issues Effectiveness . . of Planning and Implementation BA453/ Hjelm/ University of Oregon

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