Slide set 4 some fundamentals of business


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The foundations of business activity

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Slide set 4 some fundamentals of business

  1. 1. SOME FUNDAMENTALS OF BUSINESS(Why a worldview really does matter in business)
  2. 2. Essay Slide Set Outline• The Basic Point. Business involves exchange among human beings in community. That exchange has existential AND economic meaning and involves both abstract and concrete elements.• The Necessity of Exchange. For a variety of individual, interpersonal and institutional reasons, exchange is inevitable – and carries with a variety of choices and complexities.• The Dynamics of Exchange. Exchange is a complex and challenging process.• The Humanity of Exchange. Exchanges of goods and services are not merely mechanical – they are woven into the fabric of human behavior.• The Complexity of Exchange. No trading relationship is simple.• The Terms of Exchange. All exchanges take place within a background of both shared and unique value and power positions.• The Facilitation of Exchange. Continuing exchange involves the assistance of various individuals and institutions.• The Stabilization of Change. Exchange relationships over time rely on cultural and institutional support.• The Adjudication of Exchange. Differences of interests and perspectives regarding the trading relationship lead to a need to resolve conflicts.• The Morality of Exchange. Exchange requires judgments about what is fair.• The Issues of Exchange. All that we have said up to this point raises significant questions whose resolution requires an ethical system embedded in a worldview.
  3. 3. The BASIC POINT Existential Abstract Business is essentially about exchange between individuals Exchange and groups and how such exchange is created and Concrete Economic facilitated.• The fundamental characteristics of exchange between human beings demand a worldview. – Exchanges between people are both existential (they reflect and shape who we are as people) and economic (they reflect and shape what we need as people). – Exchanges between people are both abstract (they reflect and shape our ideas and ideals as people) and concrete (they reflect and shape our interests and industry as people)
  4. 4. The NECESSITY of exchange• Human beings by nature and culture were created to be partners in exchange – Institutional factors • Resource shortages require decisions about distribution • Comparative and absolute advantage and specialization encourage trading – Interpersonal factors • Dependency on others leads to trading • Specialized roles means farmers and factory workers trade • Hierarchy leads to owners and employees trading – Individual factors • Protection, procreation and productivity all require trading • Identity and affirmation are derived from trading roles
  5. 5. The DYNAMICS of exchange and theirworldview implications• The phases of exchange• The humanity of exchange• The complexity of change• The terms of exchange• The facilitation of exchange• The stabilization of change• The adjudication of exchange• The termination of change• The morality of exchangeThe idea of developing a trading relationship, even in “simple”cultures, raises a variety of issues. These issues can be addressedformally (cultural norms and structures such as laws and courts) orinformally (group expectations and individual aspirations). Buildingan on-going trading relationship
  6. 6. The PHASES of exchange• Exchanges are dynamic – they exhibit patterns of creation, maintenance, change, and termination.• Exchanges have life- cycles or phases and PHASES OF each carries different EXCHANGE demands. Successful exchange relationships require sensitivity to the ethical demands at each stage of the relationship.
  7. 7. The PHASES of exchange• During the creation stage of exchange relationships there Creation needs to be a shared concern for mutual rewards.• During the maintaining stage of exchange relationships there needs to be a shared contribution to mutual responsibility. PHASES• During the changing stage of Termination OF Maintenance exchange relationships there EXCHANGE needs to be a shared commitment to mutual responsiveness.• During the terminating stage of exchange relationships there needs to be a shared Change continuation of mutual respect.
  8. 8. The HUMANITY of exchange• Key human elements of CULTURAL NORMS exchange – The role of ASPIRATIONS (what I want aspirations and for and from myself) expectations EXPECTATIONS (what others – The role of want for and from me) cultural norms – The role of justice DISTRIBUTIVE (Social) JUSTICE PROCEDURAL (Administrative) JUSTICE RESTORATIVE (Compensatory) JUSTICE RETRIBUTIVE (Corrective) JUSTICE
  9. 9. The HUMANITY of exchange• Exchange interests (either individual or mutual) may be compatible, competing, or clashing.• There are potential wins and YOU YOU losses, and certain costs, in every WIN LOSE exchange.• Successful exchange relationships I Compatible Competing require both parties to the WIN interests interests exchange to magnify compatible (win-win) interests wherever I Competing Clashing possible, manage competing LOSE interests interests interests (so that win-loss situations are seen as fairly distributed), and minimize clashing (lose-lose) interests.
  10. 10. The HUMANITY of exchange• This would seem more self-evident here than it might be in the heat of a bargaining situation. – For instance, in labor strikes YOU YOU WIN LOSE we often have the situation where both parties stand to I Compatible Competing lose, but engage in a bitter interests interests WIN conflict because of ego needs. I Competing Clashing – In political situations we often LOSE interests interests see a similar unfortunate disposition on either side to accept losses in order to “prove a point” or not to be seen as weak.
  11. 11. The COMPLEXITY of exchange• Most exchanges have multiple stakeholders. – A stakeholder is a person or organization who has an active interest in or significant influence on the process or outcome of the exchange. – Successful exchange relationships require patience and wisdom in dealing with multiple interests/influences, conflicting interests/influences, and non-economic interests/influences. – Choices and tradeoffs are required because we have infinite demands placed on finite resources. – In almost every decision some stakeholder interests are met while others are not or are frustrated.
  12. 12. The TERMS of exchange –comparative value, relative power.• Exchanges involve both unique and shared interests based upon perceptions of comparative value and relative power.• Successful exchange relationships require both parties to focus on values that address both individual and mutual interests, and ways to negotiate differences in perceived value and power. – Failure to acknowledge and act on the interests of others may work once, or where there is a great power imbalance. – In the long run, no trading partner will continue exchange where their values and interests are not attended to in some way.
  13. 13. The FACILITATION of exchange• Ongoing exchange requires the creation of a network or Systematic exchange context. Some call policing this the “infrastructure of exchange” and it involves Strategic many elements: structures – Shared values through culture and communication Shared – Strategic structures including values money, banking, and credit – Systematic policing through a credible legal system and enforcement capacity
  14. 14. The STABILIZATION of exchange• Stability in exchange relationships can be accomplished through a variety of structural or interpersonal arrangements, each with its own strengths and weaknesses. – Self-centered competition allows the terms of exchange to be dictated by relative power differences among firms and individuals. • Those with the greater power (gained through force of talent, resource access/ownership, strategy or guile, alliances and deals, and other such means) are able to determine (and enforce) the terms of exchange over those with less power. • Such an arrangement encourages a potential useful economic outcome (survival of the firms or individuals most capable of producing net-value added for the market system) while also encouraging a potential harmful ethical outcome (survival at whatever costs in terms of cheating, gouging, monopolizing, bribing, ecological damage, etc.)
  15. 15. The STABILIZATION of exchange• Stability in exchange relationships can be accomplished through a variety of structural or interpersonal arrangements, each with its own strengths and weaknesses. – Social tradition helps produce a close community AND commercial alignment. That is, marketplace expectations are reflective of societal norms. • Our position in a social network determines our place in the market. • The upside is that exchange norms are reflective of and reinforced by cultural and community norms, producing great stability. • The downside is that there is little room to negotiate new exchange norms, and “harmful” cultural/community practices (like classism and racism and sexism) are perpetuated in the marketplace.
  16. 16. The STABILIZATION of exchange• Stability in exchange relationships can be accomplished through a variety of structural or interpersonal arrangements, each with its own strengths and weaknesses. – Family bonds help build on family relationships by linking occupation and financial support to blood and marriage ties. • Authority and responsibility become matters of kinship, not merely economic matters of self interest. • The stability produced by such a system comes at a personal cost (like individual opportunity to challenge and change the system) and an economic system cost as the competitive forces that lead to rewarding greater efficiency and effectiveness are over-ruled by non-economic family-emotional considerations.
  17. 17. The STABILIZATION of exchange• Stability in exchange relationships can be accomplished through a variety of structural or interpersonal arrangements, each with its own strengths and weaknesses. – Government control does raise the possibility that society’s interests might be better represented in other than what others might consider purely personal market place decisions. • Thus, for example, workplace safety, which might be slighted by pure market place competition, can be given greater weight in governmental decisions. • As another example, child labor, which might be advantageous economically, could be limited because of greater non-economic interests such as public health. • The downside of such government control is found in the excessively wasteful growth of government “red tape” and in the introduction of political considerations into what some believe should be marketplace determined matters (for example, waiting out a labor strike might be best economically, but government rules might force a decision to settle that is not economically sensible).
  18. 18. The STABILIZATION of exchange• Stability in exchange relationships can be accomplished through a variety of structural or interpersonal arrangements, each with its own strengths and weaknesses. – Religious institutions have, throughout history, exerted their influence over the philosophy and practice of business. • Through teachings that specify the character and conduct of business and economic activity, religious institutions can specify the responsibilities and rights of various parties to economic exchanges. • The advantage of this influence is that at its best it influences both the hearts and minds of the parties to an exchange allowing participants to practice exchange responsibility because they want to not because they have to. • The disadvantages are that (1) religious leaders might seek to direct the thinking of their adherents in ways that are harmful to exchange relationships, (2) conformity to religious rules may become superficial or cosmetic whereby exchange participants conform to the letter of the “law” but deny the “spirit” of the law, and (3) conflicts between various religious institutions can lead to harmful exchange attitudes (exclusion, segregation) and actions (favoritism).
  19. 19. The STABILIZATION of exchange• Stability in exchange relationships can be accomplished through a variety of structural or interpersonal arrangements, each with its own strengths and weaknesses. – Leadership preferences do have the advantage of personalizing market place decisions. • Here, exchange norms are determined by the character and thinking of key commercial/community leaders. • To the degree that leaders are thoughtful and creative and capable of acting well then marketplace decisions are enhanced. • The downside is that poor leaders (and even good or well intentioned leaders) make poor decisions. Even good leaders can be inconsistent, selfish and ignorant.
  20. 20. The ADJUDICATION of exchangeissues – force, negotiation, arbitration.• Exchange relationships are dynamic. Over time the interests/influence of the parties to the exchange and of related stakeholder change.• Successful exchange relationships require the ability to anticipate, assess and act on these changes from a multi- party, long-term perspective.• Changes in values are often the most difficult to assess because of their complexity, and because often these values are masked by ambiguous actions and may even be unclear to the parties holding those values.• It is critical to continue to raise the question of values in an exchange relationship in order to clarify and reinforce intentions and commitments.
  21. 21. The TERMINATION of exchange• No human exchange lasts forever. As parties to the exchange grow and alter, the attraction between parties tends to diminish over time.• The ending of an exchange relationship in ways that honor the previous relationship AND keep open the possibilities of a new relationship is crucial.• Conditions for constructive termination – Communication (seeking to be understood AND to understand) – Honesty (integrity) – Respect
  22. 22. The MORALITY of exchange• Exchange raises issues of right and wrong, of appropriate and inappropriate. These issues require “settling” at two levels: the individual and the interpersonal levels.• Individual (perceived) equity – How do I weigh my felt privileges and responsibilities? – How advantaged or disadvantaged do I feel?• Interpersonal (distributive) justice – Buyer beware approach (look out for yourself) – Might makes right approach (power = advantage) – Competitive approach (contest between positions) – Clan/community approach (what is right for the group) – Judicial approach (appeal to reason and precedent) – Philosophical approach (appeal to principles and logic) – Spiritual approach (appeal to God, His Word, and His agents)
  23. 23. The MORALITY of exchange• Qualities of exchange morality appraisal Rewarding Injuring – An effective exchange is appraised as Responsible Imbalanced • Rewarding (we both gain) Responsive Insensitive • Responsible (we both are obligated) Renegotiable Inflexible • Responsive (we both care about the other) • Renegotiable (we both are willing to adjust) – An ineffective exchange is appraised as • Injuring(one of us gains, or loses, too much) • Imbalanced (the reward/cost ratio is unacceptable) • Insensitive (we only care about advantaging ourselves) • Inflexible(we will not adjust to new conditions)
  24. 24. Some ISSUES of exchange (whose resolution would differ according to the worldview applied)• Should exchange arrangements be a private concern, a marketplace matter, and/or a public issue?• How can the differences between parties to the exchange be resolved?• What is truth in exchange communication (performance claims, advertising)?• What performance warranties can be expected AND enforced?• What, if any, are the boundaries to be placed on individual and institutional autonomy in exchanges?• What are the relative strengths and weaknesses of market-place vs. nonmarket-place solutions to exchange needs, rights and issues?• How do we weigh the costs and benefits accruing to the various parties to an exchange?• Under what conditions, if any, should one party to the exchange be permitted to alter or negate the exchange agreement?